Pakistan Auto Policy Has Started A Tug Of War Between The Japanese And The Europeans

JAP-PK-EU-TOW

Pakistani automobile sector is flourishing, there are no two opinions about it. The sales of locally made manufactured cars are ever so high. 151,134 units were sold in FY14-15, compared to 118,102 units in FY13-14. In the Q1 (July to September) of current fiscal year (FY15-16), a total number of cars sold was 44,372 units, compared to 27,630 units sold in the Q1 of FY14-15 according to Pakistan Automotive Manufacturers Association. Toyota Indus sold 13,512 units in first three months of the current fiscal year compared to 8,546 units in the first quarter of the previous fiscal year. Honda Atlas, although didn’t do as great as Toyota Indus Motors but they did manage to go by. Their numbers for sales of both City and Civic from July 2015 to October 2015 are as follows:

  • July – 2181 units
  • August – 2002 units
  • September – 2001 units
  • October – 1875 units

Although Honda Atlas skipped new international Honda City, the sales of City are going strong as well. You can only buy them on premium if you want an immediate delivery. New Honda Civic is also expected in the September of 2016.

Also Read: Honda Atlas, Time To Shakeup Your Product Line

On the other hand, Pak Suzuki saw some massive improvements in the sales of their Ravi carrier and Bolan people carrier vehicles, thanks to the Punjab Green Taxi Scheme. Sales of Ravi went up some 320% in the months of Jul-Oct15’ when compared to Jul-Oct14’ (3,910 units in Jul-Oct14’ and 12,513 units in Jul-Oct15’). Bolan’s sales total for Jul-Oct15’ is 13,019 units and it was 4,228 in Jul-Oct14’. Wagon R even though being not that popular also did well compared to last fiscal year sales number.

WagonR-Sales-JulOct1415

BolanAndRaviSales

Motorcycles business is on the rise as well. Yamaha YBR is selling like hotcakes. Atlas Honda is investing 100 million USD in the expansion of its manufacturing plant to take their total output to staggering 1.3 million units a year from current 0.6 million units a year. It is a completely different debate whether we will be getting new bike models or the same old decades old CD70 and CG125.

Also Read: Atlas Honda Is Investing US $100 Million To Increase Its Production

PAMA will release numbers of cars and bikes units sold of November in the first week of December. We can safely say that they will also show the improved overall state of Pakistani automobile manufacturing sector. So sum it all up, it has been going great for the current automakers.

Honda HR-V (5)In previous blogs, we also talked that our Big-Three automakers are bringing out new models and cars in a year or two. The most imminent is the launch of Thai-made HR-V by Honda Atlas in the Q1 of 2016. Also, they will be launching their flagship Civic next year as well. Other than that, Pak Suzuki is also going to replace Suzuki Cultus with Suzuki Celerio. Toyota Indus Motors is pondering upon the option to start locally assembling the much loved Toyota Vitz, along with Vios. These companies wouldn’t bother to bring out more cars to Pakistan if they weren’t sure they will be able to sell more cars.

RELATED: Suzuki Celerio Is Going To Replacing Suzuki Cultus

These are some exciting times if you are an auto enthusiast. I read somewhere that currently 13-14 people out of hundred own cars in Pakistan. So no doubt there is a big gap in the market that automakers, including new ones, want to exploit. Pakistan’s auto industry is still young. We only make less than 200,000 vehicles annually. There is still a huge potential in our market, for other car makers to enter Pakistan.

And one clear evidence of our market potential is the fact that officials from foreign nations are meeting with our government in order to accommodate them and their car manufacturers in our upcoming auto policy. Foreign government officials have been meeting and talking to concerned ministries and departments here in Pakistan, asking for special leeway to help them launch their automobiles in Pakistan.

Few months ago we heard about Volkswagen officials who met our Board of Investment officials and showed interest in selling VW cars in Pakistan. We got really excited to hear the news until Volkswagen got trapped in the dieselgate scandal. One of our bloggers even came up with a list of VW cars that Pakistanis would love to see here.

You can read more about the upcoming auto policy here.

Then we heard that Nissan wants to continue their operations in Pakistan with Ghandhara Nissan Limited and re-launch their cars. The committee that was working on the new auto policy has already decided to help closed units to re-launch their products in the upcoming 2015-renault-duster-update-1policy. And since Nissan and Renault work together now, there is a chance that we would see Renault cars as well. French emissary Martine Dorance told Pakistani officials that Renault is interested in selling cars in Pakistan. That can happen through its partner Nissan. They also met with concerned ministers and secretaries to make sure some special consideration is made in the new auto policy for anyone who wants to re-enter the Pakistani automobile manufacturing industry. As mentioned above, it has already been decided to provide special incentives to closed units like Nissan. Consideration like this can help Dewan Farooq Motors as well who were making and selling Kia and Hyundai cars. Nissan should bring its Datsun cars in Pakistan as well.

Belarus also wants to invest in automobile parts sector. Belarusian delegation informed Ghulam Murtaza Khan Jatoi, the Minister for Industries and Production, that investors from Belarus want to invest in plants for making parts for mainly heavy machinery and agricultural equipment.

And lastly, Russian delegation met with the officials of Islamabad Chamber of Commerce and Industry and showed interest in investing in passenger car manufacturing in Pakistan among a whole host of other investments in the energy sector. I talked about that in my previous blog that if Russians want to make a plant here and hire local Pakistani workforce while launching cars that are not only cheap to buy but also cheap to maintain, then I am okay with them selling old-looking cars like Lada Riva, etc. The whole point of the new auto policy is to bring competition and lower the prices down.

Lada Riva

Lada Riva

Also Read: Russia Is Interested In Investing In Various Sectors In Pakistan Including Auto Sector

Tuneo Kitamura, the Japanese Vice-Minister for Economy, Trade and Industry, held meetings with various Pakistani ministers and government officials in the wake of expected launch of the auto policy. And he is not the only one. Both German and French delegations met with Pakistani finance and commerce ministers and talked about potential incentives for newcomers in the new auto policy.

If we summarize all the meetings, it’s something like this; Europeans want incentives for the newcomers, and Japanese are against the incentives for Europeans. They want them for themselves as well.

Pakistani automobile market is ruled by the Japanese. Our Big-Three car makers are Japanese; Toyota, Honda and Suzuki. And these three have got our auto industry and market in their fierce hold. No way they are going to be okay with if Pakistan starts to make it easier for new car makers to enter our market. Their point is if Europeans are being accommodated with relaxed rules and incentives, they want the same treatment as well. I get that Japanese have concerns regarding their car companies working in Pakistan, but they have seen some amazing growth and success in Pakistan. Japanese have the monopoly on our car market. They should have confidence in their product. I don’t think it’s appropriate for Japanese to dictate our auto policy or put pressure on our government to change our policies to favour them.

Our government’s first duty is to serve Pakistani people and consumers. As mentioned before, the whole purpose of making new auto policy was to help bring new players in the auto industry and promote competition. The prices for new cars in Pakistan are awfully high. Cheapest new car in Pakistan is a Suzuki Mehran (PKR 625,000/-). We should be able to buy an averagely decent brand new small sedan around this price. The government is trying to find a perfect balance with current auto makers and possible new entrants. So as much as we like our local Corolla or City, we won’t mind a Renault or a Lada. Competition and more options are always going to be beneficial for the end user/buyer; meaning us.

  • Ehsan

    In the benefit of consumers, it is best if the Japanese lost this tug of war and the government for a change allows some competition in the market.

    Japanese have a complete monopoly in the auto industry, with just one small car maker (Paksuzuki) there is immense technological stagnation in the industry in the absence of competition.

    The Japanese Embassy’s efforts to block incentives for new entrant is completely against consumer interest and our country’s economy. If new assemblers don’t enter the market the consumers will suffer and will be left with no option other than to buy vehicles based on 35 year old technology.

  • Guest

    Unfortunate part of our culture: “versus” mentality. It is always “this vs that” or “us vs them”.
    This is a common mentality characteristic seen among the nations who have adopted democratic system. While the benefits and disadvantages of various governance systems is out of the scope of PW blog, let’s look at this vs vs vs mentality.

    In many different aspects, there is always vs vs vs:

    PML vs PTI
    PML vs PPP
    Even in USA there is always Republican vs Democrat.
    Civilian govt vs martial law.

    Now see how this mentality has captured the other areas of life:

    Toyota vs Honda
    Civic vs Corolla
    Mazda vs Qing-qi
    bus transporters vs railway

    For cultures not corrupted by the false promises of democracy, there is limited “vs vs vs” in their thinking. Superficially it may feel that they have no “choices” to choose from. But in reality the world is open to them because they have no dominance of 2 very large competitors so they can focus on other options too.

    The government is taking the auto policy wrong. There should be no concept of vs vs vs. Unfortunately our politicians also climb the ranks through this vs vs system so they have no other flavour. Examples if sought from other (developed and developing) countries which have successfully broken monopolies and cartels, promoted consumer choice and acted in the best interest of their citizens without pitting entities against each other.

    Unfortunately we also have the national culture of running after others. While promotion of international harmony and mutual progress through international trade and technology exchange are noble actions, the way toward it should not be in the “vs vs vs” style. Otherwise we would alienate other countries. Although fed up by the quality and lack of options available by the existing carmakers, it cannot be denied that the service or product they have made available cannot be denied. You see the situation in other countries which are under trade embargo or due to any other reason cannot get cars.

    By pitting Europe vs Japan in an unhealthy manner, only Pakistan would hurt because it is our turf. The European and Japanese companies would pull out any moment. It is against national pride to say we need them but the fact is that the good and bad effects would be there.

    The same fruit can be achieved by better methods so why not?

    Pakistan already made the experiment by implementing Euro-II through regulation. Why cannot adopt other improvements through the same method?

    Just making business easier, safeguarding vehicle manufacturers from extortion rings, lifting the minimum required standard would do wonders.

    Why adopt someone new? Why not make the existing members of the households improve their behaviour? While any newcomers are welcome why kick the old ones out?

    Getting all worked up by an auto policy just like a virgin getting excited over the wedding night. Maturity is needed to see if the auto policy (equiv. wedding) really focuses on the desired fruits in the best effective manner or not? Excitement is expected because this is the first time the wheels are moving. But blindness? Not welcome.

    Although the purpose of auto policy is to improve competition, it is also to be seen that things such as forcing the automakers to “change the look of the vehicle every 10 years” are near useless. What will be the metric of the change? This thinking only shows the superficial thinking an focus on outward appearance. Just because ‘begum sahab’ is tired of seeing the same staff car for the past 3 years. The fact that these words are in the policy means that policymakers are looking to the fact the Pakistan will always be behind the world, only the distance would be reduced. Now we are having 5 generations old models, then we would have only 2 generations old models.
    Look how the others do it, learn from the example. They just come up with a new safety standard that forces the automaker to redesign completely. Through the redesign, the automaker thinks why not change the shape at a little additional cost?

    Even in USA which is considered to be most advanced place, there are sectors such vans and trucks and buses, where those standards do not apply or apply later than private cars, and in those sectors the automakers have never changed the shape etc. An example is the yellow school bus with red flashing lights on the back which has had numerous internal updates but outwardly is the same, even manufactured by different companies. Another one is the Ford E-series.

  • Atif

    I really do not agree with what you are saying. You state that Japanese have invested. Yes that’s true but one cannot ignore history. Japanese assemblers got incentives from government at the time of entry and even today. At one time import duty concessions and even CBU concessions were given to Paksuzuki including huge govt contracts even today.. While the same lobby that once availed concessions is not even allowing SKD’s and low initial localization requirements.

    Questions is not about comparing companies, at the end consumers and economy should benefit. No one cars about if it’s PTI vs PML, Honda vs Toyota, === what matters is what value a car is providing you.

  • Guest bhai

    Tension not…. Don’t postpone you plan to buy your next car.. Fruits of this auto policy(Yet to be approved and then it will take long long time to implement) will ripe in at lest 5 years. Also don’t even think of Celerio and Vitz in Pakistan even in 2016.

  • Ehsan

    This policy has been pending since 2012…first the last govt ignored it and now the current government has formed various committees which are eating up taxpayer money yet they are not doing anything. It has been labeled “coming soon” since the current government came into power.

    All we are seeing is the policy draft being changed in favor of existing assemblers at the cost of the public. t

    I wont be surprised if this is further delayed to 2016 or even 2017 the way our incompetent politicians work.

  • Kamran

    13 to 14 out of 1000, not 100 bhai. Itna ameer nae hao Pakistan abi.

  • AbdulB1

    Paksuzuki isn’t interested to make anything in Pakistan, they just want to import everything from India. There were some talks inside the Sukuzi to shift their HQ to India from Japan.

  • Guest

    You are right, I am not against improvement. Neither am I favoring the existing carmakers. I am stating that having something is better than nothing.

    We have this national culture of running after what we do not have while leaving what we can get.

    Another point: The same healthy market competition can be had without some dramatic “pitting this vs that” like is being shown in the above sketch.

  • Dr. Aamir Liaquat Hussain

    RS should come into play and make policy and bring someone in pakistan. He is travelling all across the world. Instead of military aid for Defense Housing Authority now they should come into automobile industry. Right?

  • Hayat Khan

    i am executive banker and now CEO of multinational trading company. I am in the favor that Govt. must give more incentives to new European auto companies like BMW etc. Lets make the market more competative than simply elying on the Japanese models. There should not be any sort monopoly of international companies in this country.If it exists ,it will be disastrous some time for our economy.

  • Muhammad Yasir

    nice one 😀

  • Muhammad Yasir

    SCREW the ARROGANT AND NEFARIOUS japanese !
    if they want to cheat us ANYMORE , TO HELL WITH THEM !
    they can get the hell outta here if they want … they have swindled us ENOUGH !

    if Pakistan wants the slimmest chance to resuscitate its moribund Auto industry , give the Europeans , Chinese , Russians , CAS (central asian countries like Belarus as mentioned) and EVEN The Americans all the INCENTIVES they want …

    see a pattern developing here ? thats alot of Auto Industries going head to head for a vastly potent market!
    and the result of this will INADVERTENTLY be … two MASSIVE developments

    1. The monopoly (or tri-poly as i personally call it ) of the Japanese will be killed off once and for all.

    2. and Most importantly the PPP (purchasing power parity) of the local consumer will VASTLY improve with respect to the automobile sector ! we’ll no doubt see cars priced along the SAME pattern as the cheap Tata Nano OR even more outrageously cheaper but QUALITY vehicles !

    This is what we want and so should every pakistani …

    Hatchback pricing should start from 2-2.5 lacs and Sedans from 4-4.5 instead of the HORRID 8-10 lac for hatchbacks and 14 lac onwards for sedans in the present !

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