Pakistanis' love for cars sees auto sector ride a high

Pakistanis love for cars sees auto sector ride a high
Domestic demand for automobiles is rising annually as personal incomes stay high.

dubai - Domestic demand for automobiles is rising annually as personal incomes in the country stay high

By M. Aftab

Published: Sun 25 Mar 2018, 4:38 PM

Last updated: Sun 25 Mar 2018, 6:43 PM

Foreign and domestic investment in Pakistan's auto industry has increased significantly as demand for cars is accelerating at a high speed.

"The investment in the Pakistan-based auto manufacturing industry has risen to Rs370 billion," Iftikhar Ahmad, chairman, Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), said at the recently concluded Pakistan Auto Show-2018 in Lahore.

"The Pakistan auto industry is contributing revenue worth Rs110 billion per year to the Pakistan government, while it has achieved import substitution of $3.3 billion a year, besides generating foreign exchange of $210 million a year through exports," Ahmad said.

Everyone acknowledges that the auto sector is one of the few high-performing industries in Pakistan, while most others suffered from complete shutdown to big losses. Domestic demand for automobiles is rising annually as personal incomes in the country stay high. The government is happy at the auto industry's performance because it is generating rising tax revenues every year.

Car production rose to 50,000 in 2011-12 and it climbed 5 times to 250,000 in 2013-14. The auto industry plans to raise the output to 350,000 units by 2019-20 to feed both growing domestic demand and the economies of the UAE, Saudi Arabia and Eastern Africa, while a part of it will go to Asean as well.

"A number of foreign auto manufacturers who have unveiled plans to start manufacturing automobiles in Pakistan are likely to nearly double investment in the next couple of years," says Naveed Ahmad, an investor, manufacturer and exporter of high-tech auto spare parts to the US, France, UK and China.

"France's Renault, Germany's Volkswagen, China's Faw and South Korea's Kia have either started establishing their plants in Pakistan or have received permission to do so. They are granted concessions such as tax-free investment and other benefits, including provision of low-priced land for their plant. These automakers also are allowed to repatriate their annual profits or even their entire investment if they so desire," Ahmad told Khaleej Times.

"As of now, most of these companies already import a large quantity of high-tech auto spare parts from Pakistani firms," he said.

Ahmad said the number of auto manufacturing firms registered with Paapam has risen rapidly from 319 in 1999 to 1,400 today. The major car assemblers and manufacturers in Pakistan are Japan's Toyota, Honda and Suzuki and China's Faw.

The Autoshow-2018 has grown in size. It had 203 exhibitors, including 125 domestic and 78 foreign ones. Its key international participants included the UAE, US, Japan, China, Germany, France, UK, Turkey, Thailand, Taiwan and Sri Lanka. The rising role of Pakistan auto parts manufacturers and exporters attracted 300 international buyers. Large auto industry delegations from Sparex UK, MAN Diesel, TVH Belgium and NRB Thailand participated in the show.

Ashraf Sheikh, senior vice-president of Paapam, said the demand for automobiles is expected to rise continuously over the next 3 to 4 years. It will attract fresh investment and increase capacity building to meet expected demand.

He said the industrial base of the auto industry consists of sheet metal parts, plastic injection and blow molding, rubber components, steel forging and machining foundry and casting, aluminum die casting and machining, and electrical and electronics.  

"We are moving ahead in all these areas in view of the growing demand from the auto industry. There is a need to work on multiple fronts to achieve our growth objectives," Sheikh said.

Muhammad Salim, outgoing chairman of Paapam, said the auto industry has achieved 75 per cent localisation in cars, 96 per cent in tractors, 96 per cent in motor cycles and 80 per cent in three-wheelers. "Our auto-sector's products are currently being exported to the US, EU, African and Asian countries."

At the Auto Show, Pakistan's Regal Automobile Industries Limited (Rail), the third biggest bike assembler, announced that it will start manufacturing 5,000 light commercial vehicles from April 2018.

Rail chairman Sohail Usman said: "We have invested Rs800 million in the plant. We have signed a technical collaboration agreement with China's Desk group to assemble these vehicles under the name Prince". He said 5,000 vehicles will be produced on a single-shift basis. The production capacity will be doubled to 10,000 vehicles during the second shift.

"There is soaring demand for commercial vehicles in the wake of the ongoing implementation of the China Pakistan Economic Corridor [CPEC]."

The CPEC is being implemented with an investment of $61 billion by the two countries which will connect Western China to the Pakistani port of Gwadar, via the Central Asian Republic and Afghanistan located on the Arabian Sea, and next to Dubai in the south and Turkey, EU and UK in the north-west.

"We are the fifth investors in the green-field segment under Pakistan's new Auto Development Policy 2016-21, after United Motors, Dewan Mushtaq, Kia by Lucky Group and Hyundai by Mushtaq Group," Usman said.

So, the future looks bright for Pakistan's car lovers. With foreign and domestic auto investments flowing in, their dreams will come true.

The writer is based in Islamabad. Views expressed are his own and do not reflect the newspaper's policy.

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