New Auto Policy and 24th meeting of auto industry development committee (AIDC)

New auto policy made a great impact on automobile industry of Pakistan. New players are aggressive to get benefit of new policy. Announcements of new comers can be seen in media in a routine manner, after a long time famous international brands showed their interest in Pakistan market. Audi, Kia, Hyundai and Renault are among them. Responsibilities of Engineering Development Board – EDB, Auto Industry Development Committee – AIDC and Board of Investment – BOI, has also increased manifolds in this new revolutionary scenario. Specially for the approval of Brownfield category which is basically for the revival of an existing assembly manufacturing facilities, that is non-operational or closed on or before July 01, 2013. This is a very delicate issue because some of the units were closed due to default in repayment of bank loans. It is usual practice in Pakistan automobile industry to generate funds through advance booking of the vehicles. EDB needs to take State Bank of Pakistan on board for the approval of Brownfield investment projects. It will safeguard the interest of the consumer.

In this charged environment, on 13^th April 2017, twenty fourth meeting of auto industry development committee was held in EDB’s Islamabad office. Agenda of the meeting was of utmost importance and decisions made during these meeting will bring far sighted effects upon the automobile industry of Pakistan. It is very much felt that AIDC has to enhance its capacity of decision making. New members from different government departments / institutions should be inducted in AIDC such as SECP, Trade Mark Authorities, State Bank etc. etc.

The issue of premium, own money upon the delivery of new vehicles was the top of the agenda. Everybody knows that 1.5 lakhs to 2.0 lakhs is the premium / own money has to pay by the consumer for immediate delivery of the vehicle. This practice has created a huge sum of black money in our national economy. All three leading Japanese brands are involved in this premium money making business.

We understand that EDB has no legal responsibility / cover / right to take action against this scandal. However to provide a relief to the customers EDB suggested re-imbrues payment adjustment @ Kibor + 2. On delivery of vehicles beyond 60 days. The representative of two big players i.e. Honda and Toyota stated that they are already started re-imbursement payment but the representative / secretary general of consumer rights Commission of Pakistan, Islamabad. Who was also present in the meeting was not satisfied with their statement.

M/s Regal Automobiles industries Ltd (RAIL) applied for the Greenfield investment incentives under New investment Policy of ADP 2016-21 for establishing auto assembly plant in Lahore for the production/ assembly of light commercial vehicles (LCVs) and MiniVan/ Bus. RAIL has signed Technology Transfer agreement with DFSK Motor Co. Ltd, a subsidiary of Dongfeng Motors Corporation, China. Initially, M/s RAIL did not have exclusive rights for assembly/manufacture & sale of DFSK Motor Co. Ltd’s vehicles in Pakistan. However, after completion of first year their principals have agreed to provide exclusive rights to RAIL.

However an interesting situation was created that M/s Tayyaba Motors (Pvt.) Limited, approached EDB informing that their and M/s RAIL’s Principals are same i.e. Dongfeng Sokon and DFSK, even their factory address is same’ Further, they have informed that vehicles offered by both of them are physically same with the only difference of label/ logo.

In view of above M/s Tayyaba Motors (Pvt) Limited, requested that M/s Regal Automobile Industries Ltd., cannot avail the concessions of Greenfield investment under ADP 2016-21.

The matter was discussed and it is recommended that this matter may be forwarded to trademark authorities and S.E.C.P.

M/s Daehan Dewan Motor Company (Pvt.) Ltd., applied through Bol for revival of manufacturing plant M/S DEWAN FAROOQUE MOTORS LIMITED (DFML) and requested for grant of Brownfield Investment under Automotive Development Policy (2016-21) for the production of Shehzore (LCV) and Ssangyoung (SUVs) vehicles’.

Earlier DFML plant operations were initially shutdown in October 2010. Afterspecial approval of Auto Industry Development committee (AIDC) (16^th meeting) DFML resumed production from September 2013 to February2014 to consume left over inventory.

At that time i.e. September 2013 to February 2014, M/s Dewan Farooq Motors did not have an agreement with the principal for further import of CKD and the company just wanted to utilize the CKD already lying with the company.

All AIDC members agreed that in view of no CKD imports, lapse of agreement date and temporary operations to consume left over inventory from September 2013 to February 2014, the plant cannot be considered as operational. So all AIDC’s members has no objection with regard to extend benefits under Brownfield investment category to DFML.

M/s AL-Haj FAW Motors (Pvt.) Ltd., the manufacturer of Trucks, Prime Movers, Light Commercial Vehicles and Vans intend to invest in car manufacturing. BOI has recommended (Annexure-B) incentives under New Investment Policy of ADP 2016-21 to M/s Al-Haj FAW.AIDC is requested to advice on the matter keeping in view the investment categories i.e. Greenfield Investment or Brownfield Investment, elaborated in the ADP 2016-21. AIDC unanimously rejected the request of Al-Haj Faw Motors (Pvt) Ltd.

E.D. paint facility was mandatory under SRO656(I)/2006 dated 22.06.2006 for OEMs manufacturing HCVs in the country from a couple of years. However, this restriction was also implemented on cars & LCVs manufacturers in the Budget 2016-17 and is effective from 1^stJuly, 2016. Three Japanese car manufacturers already have this facility; however, this facility was not available with some LCVs manufacturers. These LCVs manufacturers approached EDB informing that installation of E.D. paint facility requires heavy investment as well as time and requested for relaxation for some time so that they can install this facility at their plants.

AIDC has given the following recommendations.

1. All new investors have to establish ED Painting Facilities as a pre requisite condition.
2. However existing players need to establish ED Painting Facilities by June 2018.

The EDB further informed the members that the following new investors have applied for the approval of their automobile assembly plant.

Among other interventions ADP 2016-21 provides for establishment of Pakistan Automotive Institute (PAI) for planning and implementation of activities relating to the development of the automobile industry, particularly research, education and technical guidance relating to quality improvement, safety inspection and environmental preservation as well as development of a database covering technical information relating to the automobile industry. Subsequently, EDB initiated the process for establishment of Pakistan Automobile Institute. However arrangements of funds for running this kind of institute is very necessary. EDB is facing problems for the arrangement of funds. In my opinion a special fees (very little amount i.e..Rs. 5000 per car may be charge) and may directly deposit in Pakistan Automotive Institute Account.

Exclusive written by Anwar Iqbal for Monthly AutoMark Magazine