The French auto manufacturer has not yet pulled out of Pakistan as it seeks extension in the tax benefits being offered under the Automobile Development Policy (ADP) 2016-21.
The news of Renault withdrawing its manufacturing plant in Pakistan has been circulating for the last two months or so. Due to the economic instability and inconsistent policies of the government regarding the automobile industry, the French carmaker was uncertain to start its operations in the country. The company signed an agreement with Al-Futtaim in November last year to manufacture its cars in Pakistan. The automaker acquired 54 acres land in Faisalabad for its manufacturing plant but later on, the news came that Al-Futtaim has put a hold on its investment due to issues mentioned above. The auto manufacturer started its project with an investment of $140 million in Faisalabad Industrial Estate with the production capacity of producing 50,000 units per year.
According to the latest news, the company has not abandoned its operations in the country; however, it is concerned about the extension in tax benefits of the automobile policy and Special Economic Zones Act. On the other hand, an official of Faisalabad Industrial Estate Development and Management Company (FIEDMC) said that the company’s concerns are being addressed positively. The Automobile Development Policy (ADP) on the back of its incentives offered to the new players attracted a number of foreign investors in the country. The Chief Operating Officer of FIEDMC said that several meetings were held with the officials of Renault after which we have requested the government to address their issues as soon as possible.
It holds great importance to satisfy the investors in a quest to bring foreign direct investment (FDI) into the country. The speculations regarding Renault pulling out of their investment is not true as the auto manufacturer is now holding several meetings with the concerned government departments in order to resolve their issues. The ADP is expiring in 2021, which is two years from now, and the company is yet to set up their plant. It has been the primary concern for Renault, which is seeking an extension in the automobile policy for five more years. However, there is an expectation that the federal government may extend the policy for two more years to protect the investments of the new players in the market. The automaker also wants consistent policies from the government for them to stay in the auto sector of Pakistan. Furthermore, FIEDMC has also not received any email regarding the cancellation of their investment, which also reflects that the company might be facing a few issues but doesn’t aim to quit. The company started the construction work of its plant last year but stopped owing to the reservations about the policies of the government.
The government seems willing to let new players continue with their investment, but for that to happen, a lot of consistency in the automobile policies is required. Renault might not pull out of Pakistan but under the current circumstances of continuous depreciation of rupee against the US dollar is not a good sign for any auto manufacturer to stay in the local market. The economic instability is not coming slowly at these companies as it’s putting a lot of pressure for the automakers to continue their operations. The higher cost of manufacturing is leading towards increased prices of the products, and the market size will tend to become small. The consumer’s buying power has dipped mainly in a year or so, and the auto companies are struggling to stay competitive in the market.
That’s it from our side. Drop your thoughts in the comments space below and stay tuned for more updates on plans of Renault.