Cheap local tractors dominate market
Sunday, August 30, 2009
By our correspondent
LAHORE: Engineering experts claim that local tractors completely dominate the domestic market compared to imported tractors because they are competitive due to usage of a large number of local parts. If the same practice is adopted by car manufacturers, it will bring down the prices, they suggest. They say Pakistan produces two famous global brands of tractors which are priced much lower than the brands of India and China. This is the reason that foreign tractors have failed to make a dent in the Pakistan market, even though imports are allowed at zero duty. They say even the subsidy being provided by the federal government on purchase of both local and foreign tractors has failed to reduce the demand for local tractors. Farmers are opting for local brands as after equal subsidy they are much cheaper than imported ones. The experts say the efficiency and competitiveness of local tractors is the result of usage of more than 90 per cent local components while the maximum deletion level in cars is stagnant at 70 per cent. For most of the car brands, local parts comprise around 40-50 per cent. All critical parts are imported as major assemblers of cars are hesitant to encourage deletion of hi-tech parts in Pakistan. They further say local parts are much cheaper compared to imported components. Import data reveals that even in cars which have deletion level of 70 per cent, the 30 per cent imported components are costlier than the 70 per cent local components. In the case of tractors, the country saves around 80-85 per cent of foreign exchange, but in case of cars the cost of imported components accounts for 75-85 per cent of the total cost of the vehicle. Saving in terms of foreign exchange is only 15-25 per cent. All major car assemblers of the country are foreign companies. It does not matter much for them if the car is imported from their principal plants or assembled in Pakistan. The auto parts industry is well placed to develop hi-tech parts provided the car assemblers place firm orders with them. Unlike tractors, the government has imposed protective duties on cars in a bid to protect the local auto-vendor industry and in the hope the deletion level will increase. The car assemblers are benefiting from this protection and have kept car prices extremely high. The auto parts makers urge the government to take measures to force the assemblers to go for a higher deletion level. Lately, car parts manufacturers have started concentrating on export markets. Last fiscal year, auto parts’ exports increased from $32 million to $52 million. They, however, are exporting only low value added components as they have not been provided a chance to produce hi-tech parts. They point out the Indian government has adopted a strict policy on deletion which has paid dividends.