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Thread: Pakistan's Japanese-dominated car market poised for new entrants

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    Default Pakistan's Japanese-dominated car market poised for new entrants

    Pakistan's Japanese-dominated car market poised for new entrants - d19448d6 6aaa 4359 a768 eadacf5fbca9 afp gif new By Masroor GILANI

    Islamabad (AFP) - Pakistan's car market has been dominated by Japanese automakers for decades, but a mini-economic revival looks set to attract new players from Europe and Korea into the mix.


    Despite heavy taxation on imported vehicles, enthusiasm for owning a car in Pakistan has remained undented -- thanks in part to underdeveloped public transport in the country's sprawling cities, but also the social status it brings.
    Toyota, Suzuki and Honda car assembly plants already work around the clock in the southern port city of Karachi and eastern Lahore -- yet customers can still wait for up to four months for new vehicles to be delivered.

    Now demand for cars in the South Asian giant of 200 million people is accelerating even more quickly, as economic growth has reached its fastest pace since 2008 while renewed investor confidence and easing inflation have spurred consumer spending.
    Keen to cash in, a delegation from German auto giant Volkswagen visited the country in recent weeks, according to Pakistani officials and German diplomats.

    Company spokesman Christoph Adomat told AFP that while "Volkswagen is constantly evaluating market opportunities on a worldwide basis... there are no decisions for an investment from Volkswagen side in Pakistan".
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    Pakistan's Japanese-dominated car market poised for new entrants - Part HKG Hkg10198016 1 1 0
    Demand for cars in Pakistan is accelerating as economic growth has reached its fastest pace since 20 ?

    Miftah Ismail, the chairman of Pakistan Board of Investment who took part in the talks, said Volkswagen was not the only company expressing an interest.

    "There are a number of other companies from (South) Korea and Europe that we are talking to who are thinking of setting up assembly plants in Pakistan," he said, without naming the firms.

    - Japanese stranglehold -

    US and European cars dominated Pakistan's roads in the early years after it gained independence from Britain in 1947.
    But fuel prices made their compact, efficient Japanese rivals more popular and from the 1960s onwards manufacturers like Toyota, Suzuki and Honda gained a stranglehold on the market.
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    Pakistan's Japanese-dominated car market poised for new entrants - Part HKG Hkg10198018 1 1 0
    Car sales in Pakistan in the 11 months to May this year rose 30% from a year earlier, according to a ?

    Italy's Fiat made a brief foray in the 1990s, while South Korea's Hyundai as well as Daewoo-owned Chevrolet tried -- and failed -- to gain a foothold in the 2000s before the financial crisis forced them to exit.

    Because Pakistan charges heavy duties on imported cars less than three years old, Japanese companies with in-country assembly operations can set prices significantly above the regional average.


    The bottom-of-the-range Suzuki Mehran costs the equivalent of $6,300 in Pakistan but sells for around $3,900 in neighbouring India. The most popular Corolla 1.3 sedan starts at 1.6 million rupees ($16,000), but buyers have to wait months or pay $1,500 for prompt delivery.


    The news that Volkswagen was exploring options to enter the Pakistani market has excited car enthusiasts, who are tired of high prices and limited choices.


    "I think it is a great idea because Volkswagen cars are value for money and reliability," said Romano Karim, a fan of the classic Volkswagen Beetles from the 60s and 70s that can often be seen on Pakistan's roads.

    View gallery
    Pakistan's Japanese-dominated car market poised for new entrants - Part HKG Hkg10198017 1 1 0
    Because Pakistan charges heavy duties on imported cars less than three years old, Japanese companies ?

    Haji Mohammad Shahzad, chairman of the All Pakistan Motor Dealers Association, added that having Volkswagen in the market would help drive costs down.

    "The monopoly of big three could be broken if Volkswagen produces at least 20,000-25,000 cars annually," Shahzad told AFP.


    - Renewed confidence -


    Global auto giants are attracted by Pakistan's booming economy, which the International Monetary Fund predicts will grow by 4.5 percent in the next financial year.

    Investor confidence in the medium-sized economy of $232 billion has improved since a new business-friendly government led by Nawaz Sharif took power in 2013, with Karachi's share market among the world's top 10 performers in the past year.
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    Pakistan's Japanese-dominated car market poised for new entrants - Part HKG Hkg10198020 1 1 0
    Car sales in Pakistan have boomed thanks to the growth of car leasing and financing facilities (AFP)

    The country is also undergoing a major construction boom driven by Chinese investment after President Xi Jinping visited Islamabad in April to unveil a $46 billion investment plan known as the China-Pakistan Economic Corridor.

    Car sales have also boomed thanks to the growth of car leasing and financing facilities. Sales in the 11 months to May this year rose 30 percent from a year earlier, according to industry group the Pakistan Automotive Manufacturers Association.

    Baber Kaleem Khan, editor of PakWheels.com magazine, said Volkswagen would be well poised to tap into the lower to mid-range market.

    "Pakistani automakers haven't really had much competition because their respective domains are well protected by monopolistic business practices," Khan told AFP.


    "But given VW's impressive small-range of vehicles, the German automaker can take the market from the ground up and start working to the top."
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    nicely elaborated.
    I am only responsible for what I say, not for what you understand..

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    hope this becomes true by 2020.
    - www.crackwheels.com - A skilled Dictator is much more beneficial to Country......than a Democracy of Ignorant people

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    Quote Originally Posted by capsat View Post
    hope this becomes true by 2020.
    Hopefully! The way things are speedin up for economic corrections, ppl will love to have jobs and businesses within Pakistan.
    I am only responsible for what I say, not for what you understand..

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    Nicely penned down piece
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    Title of article is not reflecting the real picture and misleading. The article says "Volkswagen is constantly evaluating market opportunities on a worldwide basis... there are no decisions for an investment from Volkswagen side in Pakistan"

    - There is no decision so far on investment by any Korean or German firm.
    - The previous (auto industry development policy) AIDP restricts entry of new players by imposing barriers which it difficult to invest and there is no significant incentive for new players.
    - The upcoming AIDP-II (Auto Industry Development Policy) has already been influenced by local automobile companies, especially Paksuzuki, which is lobbying via the Japanese Embassy to restrict any CKD import concessions to new entrants. The proposal in the earlier draft of the AIDP-II to include mandatory safety features (airbags, abs, and immobilizer) and model replacement after 10 years is already being withdrawn to favor local assemblers.

    Being realistic, government policies are favoring existing Japanese assemblers at the cost of consumers. Local auto lobby is very strong and exerts a lot of influence on the government. I do hope though the current state of affairs changes.

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    a session of good charass is more like it.

    The development of Pakistan wholly depends on a few factors some of which are

    1. is this development going to line the elected government pockets with platinum? (lahore metro anyone)
    2. are the monies coming for this interest going directly in to said elected govt pockets?
    3. Will this guarantee an advance booking for the next election result (we all know the so called elections are completely rigged)

    Its been more than 2 decades since automakers are building cars in Pakistan - yet till today they cannot claim 100% made in Pakistan, they cannot even provide a fulfilment for the local tiny microscopic market of Pakistan.

    This article is a literal LOL piece honestly, speaking of development when even basic needs like clean water supply, energy, transport and academia are at the very extreme bottom of the barrel and in some cases have leaked beyond the bottom too.
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    @autophile we all dream for a better Pakistan but the political leadership is hell-bent for mass murder of common man dream. Only the taxed are taxed repeatedly instead of expanding the tax net, current 'Munshi' has utterly failed to come out of 90s' euphoria. The "Vengeance" [ inteqami jazba ] & "Grudge" [ keena ] current regime have towards the opponents is in hyper drive. Let us pray such industrialization become a reality by 2020
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    The "Vengeance" [ inteqami jazba ] & "Grudge" [ keena ] is only for "criminals" who had infested the economical hub of Pakistan for the last two decades. You have sympathy for them?

    Quote Originally Posted by capsat View Post
    @autophile we all dream for a better Pakistan but the political leadership is hell-bent for mass murder of common man dream. Only the taxed are taxed repeatedly instead of expanding the tax net, current 'Munshi' has utterly failed to come out of 90s' euphoria. The "Vengeance" [ inteqami jazba ] & "Grudge" [ keena ] current regime have towards the opponents is in hyper drive. Let us pray such industrialization become a reality by 2020
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    Excellent Write up Autophile,

    We all need to slow down our cynical attitude and constant criticism of everything good and bad in Pakistan. True there are some big challenges which that country faces, but which country in the world does not have challenges. Pakistan is finally making a small turn around after 5 years of blind corruption by Zardari. Give the current administration some time and you would see some economic improvement which is already evident, looking at rise in automobile production, to almost double compared to 2008-2009 level.

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    Quote Originally Posted by RN100 View Post
    Excellent Write up Autophile,

    We all need to slow down our cynical attitude and constant criticism of everything good and bad in Pakistan. True there are some big challenges which that country faces, but which country in the world does not have challenges. Pakistan is finally making a small turn around after 5 years of blind corruption by Zardari. Give the current administration some time and you would see some economic improvement which is already evident, looking at rise in automobile production, to almost double compared to 2008-2009 level.
    It's not cynical it's realistic. The first step towards improvement is to understand your own weaknesses...I would recommend that you read up on the news of the auto development policy so that things will be clear to you. The Auto Industry Development Policy has been pending since 2012. I don't want to make any political statements on this forum but the government is unable to formulate a policy even after three years. Check the news the ECC committee headed by Finance Minister meets after some time simply to defer approval of the auto policy again and again. The policy itself is questionable and has been formulated by top brass of current ruling party with heavy influence from existing assemblers (and none from consumers).

    Furthermore the initial draft of the auto policy included a proposal for mandatory model replacements after 10 years to modernize the local industry and get rid of obsolete inefficient and unsafe technology based 1980s era cars like Mehran, Bolan, Ravi, and Cultus. However at the cost of consumer the current government (like all previous ones) removed this condition.
    ..consumer rights are being violated every step of the day by all governments so far. Full support has been given to PakSuzuki after government gave it a contract for 30,000 obsolete vehicles without even considering FAW which was providing relatively modern vehicles at lower costs. Even if they had to go for such huge amount of vehicles such a huge contract could have included a mandatory replacement.

    Mandatory Safety standards - airbags, immobilizer, are also not being included in policy to favor Japanese assemblers.

    One has to be realistic no decision has been taken by any new player. New players are interested - Volkswagen, General Motors, Nissan but the government is not agreeing to their demands so far and keeping a pro existing Japanese assemblers policy. Paksuzuki and other two assemblers have heavy influence. The three potential entrants have been in communication with government of Pakistan for some time now and have repeatedly asked government to give some incentives to them to invest in Pakistan. The government itself accepts that the industry is working like a cartel and Paksuzuki has total monopoly in small car segment but it does not do anything about it. When it actually comes to making a difference nobody is willing to take a stand for consumers.

    Japanese Ambassador has even gone up to PM level to ensure entry of new assemblers is blocked so that existing three assemblers can make profits and send them back to Japan without investing in new technology.

    The current policy is anti-consumer/anti-pakistan and pro-japanese.

    How to tackle challenges: New auto policy ?€“ no change on horizon - The Express Tribune

    Big 3 Continue To Influence The Auto Policy - Ban On Production Of 10 Years Old Models Off The Table - PakWheels Blog

    http://tribune.com.pk/story/937744/p...d-old-players/

    Oh yes also extent of influence of Japanese lobby on Pakistan's policy goes to the extent that even in used car imports there is higher duty on "NON-ASIAN" makes (source FBR import rules) so that Japan remains a top import source instead of Europe or the US...now u see things are not that simple.

    Even Competition Commission Pakistan, State Bank of Pakistan, and WTO recognize that the industry is acting in violation of consumer rights. However, unfortunately, polices are being made without keeping consumer interests in mind. There are also no vehicle exports from Pakistan.

    Even if there is some macroeconomic stability (due to decline in oil prices worldwide and improved security in the country) and the total volume of cars sold and produced is doubled in the next year there will be no change until and unless there are policies in place which protect consumer interests.

    The only solution is if there are policies that focus on creation of strong competition(among assemblers), exports, safety/quality standards, and modern vehicles for consumers.
    (not 1980s obsolete trash)

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    and now with additional regulatory duty aka TAX on motor vehicle import, the chances of further industrialization / automotive sector is in nose dive
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    Great article but I agree with mehranferrari here as his approach is realistic.

    This nation really needs to stand up for itself. As time has gone by there are hundreds and thousands of car enthusiasts. Hundreds of thousands.

    This country is made of racing drivers and bikers. We are born petrol heads. Everyone likes a nice well built car in Pakistan.

    Just like the whole world is exposing things about their country which are far more serious than this, it is unto everyone at every level to expose everything. Social Media is king here. You just need to keep your heads cool and prove it all.

    I for one would love to be able to buy BMW, VW, Mercedes cars in Pakistan at the prices they should be like in the USA and UK for example.

    At the moment only the Elite and rich and powerful can drive nice cars. WHY???

    It's all nonsense, there is enough of you to make a difference.

    I'd love to see the latest VW GOLF R here or the Audi TT RS (driven... amazing). The Skoda Octavia in their sporty versions are just Audi's with cheaper interior and options / quality.

    So basically the reality is, stop dreaming and do something about it. These articles are useless without some action on your part.

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    Quote Originally Posted by britpak77 View Post
    Great article but I agree with mehranferrari here as his approach is realistic.

    This nation really needs to stand up for itself. As time has gone by there are hundreds and thousands of car enthusiasts. Hundreds of thousands.

    This country is made of racing drivers and bikers. We are born petrol heads. Everyone likes a nice well built car in Pakistan.

    Just like the whole world is exposing things about their country which are far more serious than this, it is unto everyone at every level to expose everything. Social Media is king here. You just need to keep your heads cool and prove it all.

    I for one would love to be able to buy BMW, VW, Mercedes cars in Pakistan at the prices they should be like in the USA and UK for example.

    At the moment only the Elite and rich and powerful can drive nice cars. WHY???

    It's all nonsense, there is enough of you to make a difference.

    I'd love to see the latest VW GOLF R here or the Audi TT RS (driven... amazing). The Skoda Octavia in their sporty versions are just Audi's with cheaper interior and options / quality.

    So basically the reality is, stop dreaming and do something about it. These articles are useless without some action on your part.
    Well said, yes we need to stand up against the big 3 & the policies protecting them since forever!
    We at pakwheels should formulate a strategy to voice our protest in some way, cz if we dnt help ourselves nobody is gona help us.

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    Nice debate. But in the end Pakistan is not a consumer biased country as poverty, illiteracy and ignorance are rampant here. The consumer has no idea what his rights are and out of 180,000,000 people only about 180,000 people (0.1%) can afford to buy a new car every year, which is peanuts. In comparison, Thailand with about 60,000,000 people has about 1,200,000 new cars owners (2%) per year. So until and unless we improve in education and economy, things are going to remain the same here. I'm not pessimistic, just realistic
    :-)

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    please add to the fact that the dominance of a brand in Pakistan is "100%" dictated by availability of parts in scrap supply.

    and as mentioned above, academia quality and quantity is absolute terrible, its leaked beyond the bottom of the barrel - unless that is not fixed, please look into buying a donkey and cart as transport.
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    I can tell you one thing, if a Pakistani wants something, he's going to get it no matter what. That's what I have seen across all my journeys on this flat earth.

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    What's the point of commending the fact that car sales have doubled? How does it help the consumers? I'll have to agree with @mehranferrari here, we have to be realistic. I don't care if they sell more cars, I'll look at the auto policy and decide if it's something to be happy about or not. As long as ABS, airbags and immobilizers are offered to us as features (Civic, grande etc.) I'll consider it a disrespect to the people of this nation. Since we are not educated enough they can get away with selling us sub-standard products.

    But in the end as others have said we need education and upbringing as a nation before we can expect respect and good things from others.

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    There's more pleasure thinking about rebuilding old classic Mercs and BMW's with nice big engines or at least upgrading them.

    Atleast we can have the luxury of the passed in mint condition.

    New stuff ain't going to come unless a huge change is made.

    I'm going to build a W124 500E or an E34 M5 3.8 starting from the chassis up. Replica it will be but it will be all brand new and drive /perform as it was intended to.

    Can't be bothered to line the pockets of the Elite and powerful and 'wait' for things to improve every year.

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    Quote Originally Posted by Deadly_Flame View Post
    What's the point of commending the fact that car sales have doubled? How does it help the consumers? I'll have to agree with @mehranferrari here, we have to be realistic. I don't care if they sell more cars, I'll look at the auto policy and decide if it's something to be happy about or not. As long as ABS, airbags and immobilizers are offered to us as features (Civic, grande etc.) I'll consider it a disrespect to the people of this nation. Since we are not educated enough they can get away with selling us sub-standard products.

    But in the end as others have said we need education and upbringing as a nation before we can expect respect and good things from others.
    you do know that airbags, ABS, EBD, VSC, immobiliser come at a cost, your 2 million civic will be sitting at 3 million at current exchange rate - would you be happy with paying that 3 mil?

    also note that all the above technologies mean that the "poshish walay ustaad with "SRS airbag" ki die set" would have to close down shop, so would babloo ustaad lektrishann. So unless you are 100% ready for a huge jump in repair cost - be happy with what you have.
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