IS­LAM­ABAD

The Pak Banker - - NATIONAL -

Pak­istan's car mar­ket has been dom­i­nated by Ja­panese au­tomak­ers for decades, but a mini-eco­nomic re­vival looks set to at­tract new play­ers from Europe and Korea into the mix.

De­spite heavy tax­a­tion on im­ported ve­hi­cles, en­thu­si­asm for own­ing a car in Pak­istan has re­mained un­dented - thanks in part to un­der­de­vel­oped public trans­port in the coun­try's sprawl­ing cities, but also the so­cial sta­tus it brings. Toy­ota, Suzuki and Honda car assem­bly plants al­ready work around the clock in Karachi and eastern La­hore - yet cus­tomers can still wait for up to four months for new ve­hi­cles to be de­liv­ered.

Now de­mand for cars in the South Asian gi­ant of 200 mil­lion peo­ple is ac­cel­er­at­ing even more quickly, as eco­nomic growth has reached its fastest pace since 2008 while re­newed in­vestor con­fi­dence and eas­ing in­fla­tion have spurred con­sumer spend­ing.

Keen to cash in, a del­e­ga­tion from Ger­man auto gi­ant Volk­swa­gen vis­ited the coun­try in re­cent weeks, ac­cord­ing to Pak­istani of­fi­cials and Ger­man diplo­mats. Com­pany spokesper­son Christoph Ado­mat told AFP that while "Volk­swa­gen is con­stantly eval­u­at­ing mar­ket op­por­tuni- ties on a world­wide ba­sis… there are no de­ci­sions for an in­vest­ment from Volk­swa­gen side in Pak­istan".

Mif­tah Is­mail, the chair­man of Pak­istan Board of In­vest­ment who took part in the talks, said Volk­swa­gen was not the only com­pany ex­press­ing an in­ter­est. "There are a num­ber of other com­pa­nies from (South) Korea and Europe that we are talk­ing to who are think­ing of set­ting up assem­bly plants in Pak­istan," he said, with­out nam­ing the firms.

US and Euro­pean cars dom­i­nated Pak­istan's roads in the early years af­ter it gained in­de­pen­dence from Bri­tain in 1947. But fuel prices made their com­pact, effi- cient Ja­panese ri­vals more pop­u­lar and from the 1960s on­wards man­u­fac­tur­ers like Toy­ota, Suzuki and Honda gained a stran­gle­hold on the mar­ket. Italy's Fiat made a brief foray in the 1990s, while South Korea's Hyundai as well as Dae­wooowned Chevro­let tried - and failed - to gain a foothold in the 2000s be­fore the fi­nan­cial cri­sis forced them to exit.

Be­cause Pak­istan charges heavy du­ties on im­ported cars less than three years old, Ja­panese com­pa­nies with in-coun­try assem­bly oper­a­tions can set prices sig­nif­i­cantly above the re­gional av­er­age. The bot­tom-of-the-range Suzuki Mehran costs the equiv­a­lent of $6,300 in Pak­istan but sells for around $3,900 in In­dia. The most pop­u­lar Corolla 1.3 sedan starts at 1.6 mil­lion ru­pees, but buy­ers have to wait months or pay $1,500 for prompt de­liv­ery.

The news that Volk­swa­gen was ex­plor­ing op­tions to en­ter the Pak­istani mar­ket has ex­cited car en­thu­si­asts, who are tired of high prices and lim­ited choices. "I think it is a great idea be­cause Volk­swa­gen cars are value for money and re­li­a­bil­ity," said Ro­mano Karim, a fan of the clas­sic Volk­swa­gen Bee­tles from the 60s and 70s that can of­ten be seen on Pak­istan's roads. Haji Mo­ham­mad Shahzad, chair­man of the All Pak­istan Mo­tor Deal­ers As­so­ci­a­tion, added that hav­ing Volk­swa­gen in the mar­ket would help drive costs down. "The mo­nop­oly of big three could be bro­ken if Volk­swa­gen pro­duces at least 20,000-25,000 cars an­nu­ally," Shahzad told AFP.

Global auto giants are at­tracted by Pak­istan's boom­ing econ­omy, which the In­ter­na­tional Mon­e­tary Fund pre­dicts will grow by 4.5 per cent in the next fi­nan­cial year. In­vestor con­fi­dence in the medi­um­sized econ­omy of $232 bil­lion has im­proved since a new busi­ness-friendly gov­ern­ment led by Nawaz Sharif took power in 2013, with Karachi's share mar­ket among the world's top 10 per­form­ers in the past year.

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