Auto sec­tor

The Pak Banker - - FRONT PAGE -

The auto sec­tor in Pak­istan is set to grow in new di­rec­tions. The sec­tor has been long dom­i­nated by a few Ja­panese com­pa­nies but the mar­ket seems to be open­ing up now thanks to the in­cen­tives given in the auto pol­icy to at­tract new in­vestors into the field. Ac­cord­ing to a re­cent re­port, French car­maker Re­nault has an­nounced to en­ter the Pak­istani mar­ket. The com­pany said that it has signed agree­ments with Al-Fut­taim, a Dubai-based firm, for ex­clu­sive assem­bly at a new state-of-the-art plant in Karachi and dis­tri­bu­tion of Re­nault ve­hi­cles in Pak­istan. The two part­ners ex­pect the plant will be built this year. Car sales are planned to start in 2019. It is said that Re­nault aims to be­come a ma­jor player in Pak­istan, bring­ing its lat­est prod­ucts and cut­ting-edge tech­nol­ogy to set new bench­marks of safety and qual­ity.

Need­less to say, Pak­istan of­fers a huge op­por­tu­nity to car­mak­ers as de­mand for cars and com­mer­cial ve­hi­cles is grow­ing at an an­nual rate of more than 10 per cent. Ac­cord­ing to an es­ti­mate, with a pop­u­la­tion of more than 200 mil­lion, a rapidly grow­ing econ­omy and a vi­brant mid­dle-class are likely to push the mar­ket size from fewer than 300,000 units at present to more than half a mil­lion by 2020. The road net­work be­ing built across the coun­try un­der the multi­bil­lion­dol­lar China-Pak­istan Economic Cor­ri­dor (CPEC) will pro­vide ad­di­tional ma­jor im­pe­tus to auto sales over the next sev­eral years. With car pen­e­tra­tion in the coun­try as low as 13 ve­hi­cles per 1,000 peo­ple, Pak­istan is one of the last re­main­ing pop­u­lous coun­tries to go through rapid growth in mo­tori­sa­tion.

Pak­istan is said by many car­mak­ers to be one of the most dy­namic mar­kets in Asia. That is the rea­son why tax and other fis­cal in­cen­tives of­fered in the new Automotive De­vel­op­ment Pol­icy are at­tract­ing new brands. Two Korean brands - Kia and Hyundai - have al­ready part­nered with Younus Group and Nishat Group to set up their plants for start­ing lo­cal assem­bly of their cars by 2020. Volk­swa­gen is also in­ter­ested in in­vest­ing in busi­ness ven­tures in Pak­istan in a mar­ket starved for a wider range of good-qual­ity cars while Chi­nese brands also plan to bring in cheaper cars to help mid­dle-class house­holds progress to four-wheel­ers from two-wheel­ers.

It is easy to see that as the new au­tomak­ers ex­tend their foot­print into Pak­istan, grow­ing com­pe­ti­tion will force the ex­ist­ing ones to in­vest more money in tech­nol­ogy, in­tro­duce new mod­els, im­prove their qual­ity and safety bench­marks, and re­think strat­egy for main­tain­ing their present mar­ket share. Ac­cord­ing to me­dia reports, the ex­ist­ing Ja­panese man­u­fac­tur­ers are fo­cus­ing on lo­cal­i­sa­tion, in­vest­ing in plant and ma­chin­ery, im­prov­ing ef­fi­cien­cies by re­duc­ing pro­duc­tion line bot­tle­necks, and in­tro­duc­ing new mod­els and up­grad­ing the ex­ist­ing vari­ants to com­pete with new play­ers when they start pro­duc­tion. Be­sides, the ex­ist­ing as­sem­blers are also im­prov­ing safety fea­tures in their cars to at­tract buy­ers. In­dus Mo­tors, for ex­am­ple, is now pro­vid­ing safety airbags in all its Toy­ota ve­hi­cles even though it is not manda­tory un­der govern­ment laws. They are adding fea­tures they had never thought of of­fer­ing in this mar­ket be­fore.

The auto pol­icy makes clear that given the right pol­icy in­cen­tives, there are in­deed for­eign in­vestors keen to come to Pak­istan and com­pete in a promis­ing land­scape that of­fers sound op­por­tu­ni­ties for growth. If things go smoothly, by 2020 there could be up to nine more com­pa­nies in the mar­ket, vastly ex­pand­ing the choices avail­able to con­sumers, un­leash­ing gen­uine price com­pe­ti­tion, and tak­ing a huge leap to­wards elim­i­nat­ing the men­ace of pre­mium charges for timely de­liv­ery. At the same time, the govern­ment must keep a sharp eye on the mar­ket to en­sure more em­pha­sis on the in­dige­nous man­u­fac­tur­ers of cars as op­posed to im­ports.

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