European and Korean auto brands could find a place in the Pakistani market.
Soon after independence, roads in Pakistan sported cars from the US and Europe, primarily because of their influence over the sub- continent during the pre- partition days. However, the automobile industry got a facelift in 1989- 90 when the Indus Motor Company Limited (IMC) was established. It was a joint venture between the House of Habib (HOH) and two Japanese companies namely, Toyota Motor Corporation (TMC) and Toyota Tsusho Corporation ( TTC). Since then, IMC’s flagship brand, Corolla, has been a market leader in Pakistan along with Honda’s Civic and City. It is interesting to see that nearly five years after the formation of IMC, Honda – a joint venture between the Honda Motor Company Limited and the Atlas Group of Companies, Pakistan - delivered the first car from its assembly line in May 1994. This was another turning point in Pakistan’s automobile sector when two Japanese automobile giants made their presence felt, while IMC was the first to spread its wings in Pakistan, and to date, enjoys the edge of becoming the first to enter the market.
Moreover, after the 2013 general elections, investor confidence has surged in the country’s automobile sector, primarily because of the current government’s business friendly approach. Pakistan’s automobile sector, which is currently worth nearly $ 232 billion, is moving towards an economic revival and is expected to attract automobile companies from Europe and Korea.
According to a report, nearly 39,000 automobiles were imported in Pakistan in fiscal year 2015. The sales of locally assembled cars also jumped over the years. In 2009, 82,844 cars were sold in Pakistan while in 20142015 the number reached 151,134. The first in the economic came in June 2015 when car manufacturers declared that sales went up to 151,134 units in 2014-15 as compared to 118,102 in the preceding year.
This is good news for European and Korean automobile manufacturers who can increase their customer base in Pakistan. Although they are selling their vehicles in the country, they do not have assembly plants akin to those of Toyota, Honda and Suzuki. As both Toyota and Honda regularly bring in innovation in their designs and features, the Korean and European automobile manufactures will face tough competition if they decide to make an entry. They would also need to tackle Suzuki’s market dominance which has been running parallel with that of IMC and Honda.
Germany’s Volkswagen has recently showed interest in Pakistan. According to the Pakistan Board of Investment, Volkswagen is not the only company expressing interest. There are a number of other companies from ( South) Korea and Europe that are thinking of setting up assembly plants in Pakistan. It is evident that Pakistan will soon witness an economic revival – and it would bring economic stability and foreign investment. It is bound to affect the equilibrium that Japanese automobiles have maintained in Pakistan. It may not bode well for the Japanese automakers’ confidence in the country as well as the loyal users of these automobiles.
Those who buy automobiles show interest in Japanese brands for their toughness, long- term value, higher resale value and availability of spare parts, which is why more Toyotas and Hondas are seen in Pakistan, especially in Karachi. To gain a competitive edge over Suzuki, the European and Korean companies may even attempt to follow a market penetration strategy because this Japanese brand has a presence in every part of the country.
European and Korean automobile manufacturers must learn from their past experience before making an entry into the Pakistani market. Fiat, an Italian car company came to Pakistan, first in the 1990s and later in the early 2000s, but could not manage to stay afloat due to the competition. Similarly, Korea’s Hyundai has been selling cars in Pakistan but has not been successful in winning a major chunk of the market. The European and Korean companies must create a worthwhile strategy to market their cars because the average Pakistani automobile user will take into consideration many factors before switching from Toyota, Honda or Suzuki, which have positioned themselves well in the market and in the buyer’s mind.
If the German automobile manufacturers can strike a deal with Pakistan in selling their cars, it will create an impetus in generating revenue and provide Pakistani automobile users with cars that last a lifetime. However, the prices of these cars will attract only the elite or the upper- middle class and the masses will still prefer buying Toyotas and Suzukis.
The European and Korean companies can make an entry by providing vehicles for business and commercial use. If plans are set and the hegemony of the public transport sector can be diminished, many foreign companies can install their manufacturing plants in Pakistan to assemble commercial vehicles that will provide job opportunities and induce new life in Pakistan’s automobile sector.
The car loan scheme initiated in 2001- 02 did serve to increase the number of cars in Pakistan as anyone having the money to finance a car loan took advantage of the scheme. If the automobile sector’s economic revival is big enough to attract European and Korean companies, then the car loan scheme can be applied to these cars as well. The government also needs to seriously consider the growing traffic in Pakistani cities, especially Karachi, before granting permission to such companies to enter the country.
With Toyota, Honda, and Suzuki maintaining their place as giants in Pakistan’s automobile sector, there is a need for the European and Korean manufactures to find a foothold and offer more variety and value for money for the car customer.