Pakistan?€™s car industry: Flop gear | The Economist
Pakistan’s car industry
Flop gear
An absurdly protected industry
May 9th 2015 | ISLAMABAD | From the print edition
THINGS can get emotional at the main Suzuki dealership in Islamabad, the Pakistani capital. “Many of our customers literally cry when they buy their first Mehran,” says Mohammad Ali Khalid, the managing director. “All their lives they have been saving up little amounts to buy this car.”
Yet there is plenty more to cry about over the Suzuki Mehran, Pakistan’s bottom-of-the-range car. The boxy contraption has barely changed since its debut in 1989. Taxi drivers complain that parts straight from the factory quickly have to be replaced.
The Mehran is the only small car available—and you have to wait for months to get one. At $6,250 for the basic model, it is not cheap. It costs a third more than the Indian equivalent, the Suzuki Maruti—which was phased out altogether last year.
Choice and value are also in short supply at the higher end of the market. The roads are clogged with Toyota Corollas and a few Honda Civics—almost invariably white. They are assembled locally and are years behind in offering airbags, anti-lock braking systems and even electric windows as standard.
The industry is carved up among just three Japanese brands, Suzuki, Honda and Toyota, assembling cars with imported parts in joint ventures with local players. They enjoy the protection of high tariffs and other Byzantine rules. It is meant to encourage “indigenisation” of production.
Occasionally Pakistan’s competition commission kicks up a fuss. Five years ago it warned that the “neat division of the market” allowed assemblers to adopt a “strategy of increasing profits on limited production instead of increasing volumes.” Yet the industry’s shrill complaints forced the commission to pull its latest damning report, published last year, from its website.
Meanwhile, a country with a population of 190m dribbles out just 116,000 cars a year. The industry is worried that the government plans to loosen restrictions on the import of second-hand cars in a bid to inject a little competition into the sector. “The government needs to make up its mind whether it wants to be a nation of traders or do you want to have a manufacturing base in this country,” says Parvez Ghias, Toyota’s head in Pakistan. If second-hand cars worry the industry, you know something is wrong.
From the print edition: Asia