Which way, auto industry?
According to data released by the Pakistan Automobiles Manufacturers Association (PAMA), the Pakistan automobile industry faced depreciation in sales in 2008, after experiencing an encouraging growth period from 2001 to 2007. The automobile industry and the government of Pakistan had then set a target of half million units production by the year 2011-2012.
At that stage, the Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) and Pakistan Automobile Manufacturers Association (PAMA) had proposed a modified import policy for cars and spare parts. This was targeted at giving the local automobile industry more stability. The proposals included withdrawal of 5 percent excise duty on cars and imposition of a ban on import of used parts instead of allowing their import at 30 percent redemption duty. The proposals also asked that the government should place stringent checks on auto parts imported commercially or as semi knocked down kits.
Further proposals focused on introduction of non-tariff measures to curb import of parts being manufactured in Pakistan. It was pointed out that the imposed 50 percent duty had failed to stop import of these parts as the import prices were being easily manipulated by importers. Both associations had shown concern over the frozen investment of Rs. 98 billion, which was expected to remain at the same level by 2011-12. In addition to these major concerns, the associations had appealed for special incentives for the auto sector, including lower mark-up on loans and a waiver of 35 percent margin on L/Cs.
However, the 2011-2012 budget contains incentives for new entrants in the automobile sector and proposals encouraging the import of cars. As such, the local industry again appears to be surrounded with fears of stilted production and profits. A relaxed duty structure for new entrants, rise in price of the Japanese yen against the rupee and production concerns have further pressurised the existing local auto industry. There are also apprehensions of a discrepancy occurring between existing and new assemblers’ product prices.
Currently, there are some 82 vehicle assemblers in the industry producing passenger cars, light commercial vehicles, trucks, buses, tractors and 2 and 3 wheelers. The leading names are Indus Motors Company, Honda Atlas Cars Pakistan Ltd., Pak Suzuki Motors, Nexus Automotive, Al Ghazi Tractors, Dewan Motors, Gandhara Industries, Hino-Pak Motors and Adam Motors. It is realized that the automobile industry in Pakistan has a huge production potential and generates a revenue of Rs. 63 billion annually, besides paying taxes and providing employment to more than 200,000 people.
The major initiatives provided by the government in the form of the National Trade Corridor Improvement Program (NTCIP) and the Auto Industry Development Program (AIDP) have the potential to resolve some key concerns of the industry. The Engineering Development Board (EDB) has also actively implemented the AIDP to increase the GDP contribution from the automotive sector. However, there is further need to address the industry’s concerns by making the suggestions put forward by the Pakistan Automobiles Manufacturers Association and the Pakistan Association of Auto Parts and Accessories Manufacturers a part of policy formulation to achieve the set targets for the current fiscal year. This will carry the national auto industry forward