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Pakistan to finalise long-term policy for auto parts industry

The study also sought to address issues concerning quality development, standards, domestic and international market potential, the employment potential, and a mechanism for successfully tapping the full potential of the country’s auto parts industry.

The auto parts industry is $125 billion market dominated largely by the industrialised countries. The share of Pakistan in the total exports is only $25 million. Auto parts consumption is huge but the local production is only 12 per cent of total sales. The auto parts vendors are also showing steady growth and becoming one of the most dynamic sector in Pakistan’s manufacturing.

The industry has generated 110,000 jobs and exported $25.03 million thus saving foreign exchange of Rs 23 billion. As the production of automotive is increasing in Pakistan, the auto parts vendor industry is also expanding.

The components produced in the country range between 55-70 percent of total Completely Knocked Down (CKD) kit. The policy of localisation, helping this sector to also generate more jobs is needed to be effectively pursued.

The government was informed by its planners that the automotive industry has potential for growth and employment because of its greater backward and forward linkages. The global exports of auto sector are over $600 billion while Pakistan’s share is approximately $50 million. The domestic market is expanding with rising income levels and auto financing facility extended by banks.

Since 2000-01, there has been a rising trend in the capacity utilisation and the industry at present is operating at full capacity. The sector employs about 300,000 workers and that is expected to rise sharply due to a positive outlook of the industry. Similarly, the motorcycle industry is growing steadily. It has greater linkages with the vendor industry that shows its potential for growth.

This sector contributes $200 million in GDP and provides employment to more than 100,000 workers. Also, Pakistan’s being an agricultural country have a large market for tractors. The total capacity of the industry is 45,000 tractors per year but only 78 per cent of the capacity is utilised.

The tractor density is low (one per 98 hectares) in Pakistan compared to India (one per 83 hectares). It is believed that one tractor (50 hp) is required for 30-35 hectares of land for optimum farm performance. The sector contributes $200 million in GDP and provides employment to more than 50,000 workers. The industry is developed on old techniques and produce low value added products of inferior quality. There is no product and market diversification; the industry largely caters to the needs of limited markets of the West.