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Thread: Why don't Honda/Toyota present an average priced car in Pakistan?

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    Default Why don't Honda/Toyota present an average priced car in Pakistan?

    I have failed to understand why these 2 car manufacturers dont present a car for middle class segment in Pakistan.
    So many local options available in India, but here...........
    Any answers from our fellow pakwheelers........?

    -

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    Majid Sb,

    The indian market have now attained such a significant volume that motor manufacturers can no longer ignore it, infact they go out of their way to get the foothold in it, so that is why they have such a huge variety.

    While policy makers in Pakistan took a different path, where Pakistani Government set up joint ventures with Japanese companies to attract them & serve local needs, and when they gained a certain volume in sales, then Govt sold their share back to the manufacturers (Suzuki, Honda, Toyota, Mazda etc) but instead of letting the free market take its course (survival of the fittest) they gave them the protection to save/ensure the jobs at the OEM/local vendors, now the duty structure is as such that Govt has created huge overhead some of which goes to Govt coffers, while the rest becomes a device in manufacturers to monopolize the market which in turn gives them guarantee that no matter how much outdated product they have in Pakistani market it will not be and utter failure. Another side effect for all these shenanigans is that our local vehicles have no depreciation concept, worth of old vehicles remains pretty static in-fact in some cases vehicles appreciate rather then other way around (example is corolla/Civics/City etc) which borders on lunacy, this situation gives OEM added incentives to stick to old models.

    So this brings us to current affairs, where the cheap as chips Camry & Accord which are staple products for middle class around the world (in-fact Camry is mostly used as Cab) become status symbols and are sold for almost the same prices as base model Mercedes E200, and 4x4 which are used as modern donkey and cart has turned into prized possession and family heirlooms which is ridiculous situation, but the fact is in this country Vehicle OEM are now one of the strongest lobbyists and use their clout to keep the status quo as they don't want any changes in duty structures, for example the current situation lets Pak Suzuki choose a model as it becomes obsolete in the rest of the world, and they shift the old press machines/assembly lines from Thailand, Malaysia etc to Pakistan and reap the profits of obsolete models.

    Because our market does not have the volume due to this closed market situation and as a result has not gained a critical volume that new manufacturers (especially German, Italian and American etc) don't feel any pain by their lack of presence in Pakistan, while few of them who wanted to check the waters by importing CBU (completely built units) could gain no traction and either they failed miserably or not bothered at all. While the duties on CBU in Pakistan have unnecessary ambiguity that it takes rocket science to decipher it, for example the duty structure is not uniform for Japanese companies and their western counterparts, while the hybrids have totally different structure as well.

    Q: Is there any cure for current situation?
    A: Off-course it can be rectified by change of the policy, just like telecom, services & Oil & gas sectors were deregulated, do the same to motor manufacturers as well.
    Q: What are the steps for achieving these goals?
    A: Regulation can not ask an OEM to bring the latest models, but they can be framed such a way that obsolete products can no longer be manufactured, such as,
    1) Regulate the power trains to such and extent, that they are closer to latest emission standards (Euro 3, 4 etc), so they have to phase out the older ones for the new ones, as petroleum levy is charged, it should be used to give the incentive to upgrade the refineries to lower the Sulfur content in the fuel.
    2) Overhead should be reduced on CBU units & cut down on red tape, so that commitment for new entrant is not too high, and let the open market decide which company/product survives.
    3) Duty structure that is based on displacement should be replaced by the power output of engines, better still they should encourage the efficiency rather then the size.
    4) Safeguarding the local jobs in manufacturers/vendors have gave nothing but grief to masses, so Govt should no longer micro manage this situation & let the fate of these jobs at the mercy of market economy, as these jobs are not worth mortgaging whole nation, while most of those skilled labor can easily serve in the cottage industry of providing the service to newly imported vehicles so there won't even be that much job loss as well.
    5) Don't obsess with foreign exchange loss, if the market is truly open, within few years there will be export oriented OEM setup which will be far more effective in job creation rather then focusing on domestic consumers, the shining example is Thailand and its manufacturing today, its much more focused on export market & so they are far better off then us.

    Sorry rant is getting longer, hopefully it gives you some understanding of the current situation.

    Faisal

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    simple as that,a middle class person has a corolla now a days,he spends on these things instead of basic things.

    Why create cheap thing when that same cheap thing can go very easily at higher cost.

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    I am gonna give a simple answer. Basically, 3 things
    - Small market so no economies of scale
    - High custom duty and taxes
    - No competition

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    Quote Originally Posted by Fasaliqbal View Post
    Majid Sb,

    The indian market have now attained such a significant volume that motor manufacturers can no longer ignore it, infact they go out of their way to get the foothold in it, so that is why they have such a huge variety.

    While policy makers in Pakistan took a different path, where Pakistani Government set up joint ventures with Japanese companies to attract them & serve local needs, and when they gained a certain volume in sales, then Govt sold their share back to the manufacturers (Suzuki, Honda, Toyota, Mazda etc) but instead of letting the free market take its course (survival of the fittest) they gave them the protection to save/ensure the jobs at the OEM/local vendors, now the duty structure is as such that Govt has created huge overhead some of which goes to Govt coffers, while the rest becomes a device in manufacturers to monopolize the market which in turn gives them guarantee that no matter how much outdated product they have in Pakistani market it will not be and utter failure. Another side effect for all these shenanigans is that our local vehicles have no depreciation concept, worth of old vehicles remains pretty static in-fact in some cases vehicles appreciate rather then other way around (example is corolla/Civics/City etc) which borders on lunacy, this situation gives OEM added incentives to stick to old models.

    So this brings us to current affairs, where the cheap as chips Camry & Accord which are staple products for middle class around the world (in-fact Camry is mostly used as Cab) become status symbols and are sold for almost the same prices as base model Mercedes E200, and 4x4 which are used as modern donkey and cart has turned into prized possession and family heirlooms which is ridiculous situation, but the fact is in this country Vehicle OEM are now one of the strongest lobbyists and use their clout to keep the status quo as they don't want any changes in duty structures, for example the current situation lets Pak Suzuki choose a model as it becomes obsolete in the rest of the world, and they shift the old press machines/assembly lines from Thailand, Malaysia etc to Pakistan and reap the profits of obsolete models.

    Because our market does not have the volume due to this closed market situation and as a result has not gained a critical volume that new manufacturers (especially German, Italian and American etc) don't feel any pain by their lack of presence in Pakistan, while few of them who wanted to check the waters by importing CBU (completely built units) could gain no traction and either they failed miserably or not bothered at all. While the duties on CBU in Pakistan have unnecessary ambiguity that it takes rocket science to decipher it, for example the duty structure is not uniform for Japanese companies and their western counterparts, while the hybrids have totally different structure as well.

    Q: Is there any cure for current situation?
    A: Off-course it can be rectified by change of the policy, just like telecom, services & Oil & gas sectors were deregulated, do the same to motor manufacturers as well.
    Q: What are the steps for achieving these goals?
    A: Regulation can not ask an OEM to bring the latest models, but they can be framed such a way that obsolete products can no longer be manufactured, such as,
    1) Regulate the power trains to such and extent, that they are closer to latest emission standards (Euro 3, 4 etc), so they have to phase out the older ones for the new ones, as petroleum levy is charged, it should be used to give the incentive to upgrade the refineries to lower the Sulfur content in the fuel.
    2) Overhead should be reduced on CBU units & cut down on red tape, so that commitment for new entrant is not too high, and let the open market decide which company/product survives.
    3) Duty structure that is based on displacement should be replaced by the power output of engines, better still they should encourage the efficiency rather then the size.
    4) Safeguarding the local jobs in manufacturers/vendors have gave nothing but grief to masses, so Govt should no longer micro manage this situation & let the fate of these jobs at the mercy of market economy, as these jobs are not worth mortgaging whole nation, while most of those skilled labor can easily serve in the cottage industry of providing the service to newly imported vehicles so there won't even be that much job loss as well.
    5) Don't obsess with foreign exchange loss, if the market is truly open, within few years there will be export oriented OEM setup which will be far more effective in job creation rather then focusing on domestic consumers, the shining example is Thailand and its manufacturing today, its much more focused on export market & so they are far better off then us.

    Sorry rant is getting longer, hopefully it gives you some understanding of the current situation.

    Faisal
    The entirety of the situation is captured in one word of urdu called "jaahilyat"
    ZRS - Zulfiqar Racing Systems ..... - professionals at work - at crackwheels.com

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    Quote Originally Posted by Xulfiqar View Post
    The entirety of the situation is captured in one word of urdu called "jaahilyat"
    Do you think there is a future in the auto industry if young leaders are appointed with a sense of local requirement?
    Turbo lag is like foreplay. You know it's coming. And it's gonna be good.

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    Default correction

    read form previous threads that sooner or later honda is going to introduce new models in pakistan.. i hope they suit middle class.
    btw i dont agree with @Exubery that there is no competition coz japanese/imported cars have effected the revenues of local brands. and i think that could be 1 reason that honda is introducing new models(not confirmed)

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    the market is microscopic tiny - why should a company think to invest monies in a market that has an extremely lean sales.
    ZRS - Zulfiqar Racing Systems ..... - professionals at work - at crackwheels.com

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    its only possible if more car manufacturer like fiat kia skoda Nissan hyundai come into Pakistan and produce cars locally..... without the fear of paying batha

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    Quote Originally Posted by zamza View Post
    its only possible if more car manufacturer like fiat kia skoda Nissan hyundai come into Pakistan and produce cars locally..... without the fear of paying batha
    No chance at all, just look at the fate of Yamaha and their supposed 150 Million $ investment plan, as I said earlier bureaucratic red-tape/lobbying has made it almost impossible to setup new facilities.

    There are other factors as well, to setup these sort of facilities you preferably need private docks on waterfront or nearby sea-port, skilled labor, reliable power, peace & security, now you tell us which place in Pakistan has all of these available?

    Even if Ford, GM, VW go through all of trouble, then what is the gain for their pain? at most the volume of 10,000 ~ 15,000 vehicles/year, which for them doesn't mean much.

    Fact is that the India is not that much investment friendly place either, there is also same sort of obstacles like bureaucratic red-tape, they have to setup joint ventures with local companies, transfer the technology, train local staff and support local vendors, but after doing all of these things they can not own more then 49% stake of their subsidiary, so why are they willing to go through all of this trouble? Its the critical volume which ensures that rate of return for manufacturers is much quicker/better.

    While the low volume of our markets plus lack of depreciation value of existing vehicles on road has created the situation where with sixth largest nation by population on earth(more then 184 Million) holds no charm for OEM's.

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    you are right but India is different story car manufacturers not just making cars for Indian market but also for middle east market which is ever running market people will never stop buying cars in middle east almost all average priced cars on middle eastern roads these days, are manufactured in india from Ford Nissan Toyota Renault Skoda Volvo Fiat Hyundai Daewoo even Mid sized range Rover suvs

    so? cheap Labour secure environment low tax and 2nd largest population what else investor could demand for?

    Chevrolet too

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    Wonderful and nice discussion. Greatful for all friends who responded. At least these manufacturers who work like a cartel and choke scope for small players cpuld have brought better and nice models n smaller segement.
    The way people are buying smaller cars without any support base reflects the need of the day.
    I feel our car manufacturers are blind to this segement at all. There is huge number who wish 2 upgrade from bike 2 a car. So whats the option for them in pakistan.

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    Monopoly

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    put a person in power who is riding bike with 5 children, but no you voted a person who has UK imported range rover and bunch of ganjas those who even go to toilet in German cars

    these Pakistanis are getting what they deserves i feel no pain for them

    sorry if anyone get offended by my comment but i can't stop myself to speak truth

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    @zamza sb, people around the world r same as n pakistan. Pakistan has good people and bad both like any other country. If we stop buying the crap these cartels sell us they wl vanish. Gayab ho jayein gaye. Presently they know whatever they offer we wl buy. We wl see people buying 4.5 million prius also. Is it really worth it ? Thats the question. ...

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    @majedkhan sir

    yeh to gayab ho jayein gy per new investors asmaan sy nahi giray gy unko lana parta hai with friendly policies and insurance of safe business ab yeh unko kon provide karay ga? mulla umar?

    aur boycott har chheez ka haal nahi hota

    tree ko uper sy jitna marzi kato wo nahi hatam hoga jab tak usko roots sy nahi kato gy

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    Quote Originally Posted by adeel_yasir0 View Post
    read form previous threads that sooner or later honda is going to introduce new models in pakistan.. i hope they suit middle class.
    btw i dont agree with @Exubery that there is no competition coz japanese/imported cars have effected the revenues of local brands. and i think that could be 1 reason that honda is introducing new models(not confirmed)
    You do realize that the local assemblers successfully lobbied against those Japanese imports, right? They got the age limit reduced from 5 years to 3 years and as a result imports have tumbled. So yes we need to remove barriers to trade and allow imports but first we need leaders who will stand up to the local lobby and not give in because they are bribed. Supposedly 97 crore was paid out in bribes to get them to reduce the used car age limit.

    Anyway great post by @Fasaliqbal. Probably one of the best posts I have read on this forum.

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    Quote Originally Posted by majedkhan View Post
    @zamza sb, people around the world r same as n pakistan.
    No this is not true. Pakistanis are in a league of their own. I have never been to a country where perfect strangers harbor malice towards each other.

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    @Abdussamad
    removing barriers means you dont wont to see your country out of crises. Pakistan maximum part is running on importation (even tamator is being imported from India) which means your money is outgoing which reduces your economy level and foreign reserves. later we cry on increasing prices without knowing whats going on. pakistan men aj kal investment land ar property/construstion men o ri hai... and these things are not gonna support your economy.

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    @Abdussamad
    removing barriers means you dont wont to see your country out of crises. Pakistan maximum part is running on importation (even tamator is being imported from India) which means your money is outgoing which reduces your economy level and foreign reserves. later we cry on increasing prices without knowing whats going on. pakistan men aj kal investment land ar property/construstion men o ri hai... and these things are not gonna support your economy.

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