Pakistan’s auto industry is nourished under the shadow of protectionist policies with no competitive atmosphere. Meanwhile, Japanese companies including Indus Motor Company (Toyota), Honda Atlas Cars Pvt. Ltd (HACL) and Pakistan Suzuki Motor Company (PSMC) enjoyed a comfortable position. However, winds of change are sweeping the dominance of BIG 3, ushering in a new era of challenges and opportunities.
Suffice it to say, there is no cozy environment anymore as policies have changed. Opening the market for new entrants in Completely Knocked Down (CKD) segment and relaxing the regulation pertaining to used import cars has unleashed a much-needed competition.
A Policy Shift
This change in policies is an open directive for three Japanese car giants to enhance their exports reaching 10% of their total imports by 2025-26. And surprisingly, Japanese has threatened World Trade Organization (WTO) intervention over auto export policy.
In simpler terms, Pakistan says it’s following the rules of WTO. The problem will be talked about by both Pakistan and Japan, and if they don’t agree, it might go to the WTO for a formal decision.
The Challenges
Car makers say they can’t compete in selling cars abroad because of extra taxes, no agreements for trading car parts freely, and not many people wanting the kind of cars they make. They want agreements where there are no taxes and to help build up the car industry in Pakistan to be better at selling abroad.
As the government nudges towards export targets, Japanese dominance faces a formidable challenge from Chinese contenders.
With expertise in Electric Vehicles (EVs) and a willingness to tap into new markets, Chinese manufacturers pose a credible threat. Already, Chinese entrants are exploring export avenues, leveraging Pakistan’s strategic location and right-hand driving market alignment.
In this evolving landscape, adaptation is imperative for Japanese assemblers. Rethinking strategies to enhance localization value and embracing innovation in export endeavors are crucial
“…and not many people wanting the kind of cars they make.”
This half a sentence, says SO much. This proves that the local three know what they sell in Pakistan and where they stand in the grand scheme of things. The Pakistan Auto market is their dumping ground. And now it has become one for the Koreans as well. Only the Chinese have kept things up to date. But that might also change, only time will tell.
The other more obvious reason is that they know how limited the RHD market is. Only about 25% of the countries are RHD in the world. We are part of that. Between the China, India, Thailand, Indonesia etc. The Japanese auto companies have all the manufacturing capabilities they require to cater for this region and others. Adding Pakistan into the mix, a country which assembles obsolete cars, and does not meet any international quality and safety standards and even emission standards, it is not required! They are happy to have Pakistan as a market where they can sell all the leftover parts and, even with plant closures and sales drop-offs, still make respectable profits.
Mind you, with all the new wave of “profit loss” sympathy shenanigans by the local Japani companies, just a few months ago they were telling us how they still managed to come out on top and still made a profit. It is very confusing. The only take away from the confusion they spread is that these companies despite all their setbacks (and their “hai main lut gayi! hai main barbad ho gayi!”, ‘Bee Jamalo’ styled sympathy screams from time to time or when they want to raise the prices 🤣🤦♂️), still only ever see a profit drop but never a true, going into the negative, profit loss. That is why the Japanese love Pakistan.
The Japanese have all the CBU and CKD production they need. Both RHD and LHD. The only area where Pakistan can still enter in, is parts production. Instead of selling cars we must focus on our parts vendor industry. Most/almost all parts don’t care about being fitted to RHD or LHD. “Quality parts at competitive rates” is always in business. Make the parts making vendors the stars of the show. Help them to achieve international parts quality standards and make making parts for multiple car-brands their top priority. Also, one thing which I do agree on with the auto industry, ease taxes and provide incentives for exports. Also, make the import of machine tooling for such endeavors easy for the parts vendor companies. The more exports they do the more tax incentives/benefits they are given.
Lastly, have these companies ever threatened any other country they were operating in like the US or India etc. about their export requirements? We are so powerless. From governance to industry, all is always dictated to us. Even by two-bit auto companies, who seem to be getting too big for their own good are threatening us. These local companies have always spent more of Pakistan’s dollar reserves than they ever gave back to the country in the form of taxes or jobs etc.
“Importer ho bhai! Pakistan ko salon (years and years!) se kha rahay ho!!!”
@Ali Khan
You have also been involved in washing your hands off in the river. So, do not bother to talk about eating Pakistani reserves, which are also effected when you choose to pay for a non-Pakistani brand lubricant.