The auto industry has achieved so-called milestone up to June 30th 2017 in which the two wheeler sector is at its peak as compared to segment of the automobile industry.
Some four years back, there were 125 bike assemblers approved by the Engineering Development Board (EDB) but currently more than 80 units are in operation.
Production of bikes has swelled to around 2.5 million units in 2016-2017 as per official figures of EDB but Chairman Association of Pakistan Motorcycle Assemblers (APMA), Mohammad Sabir Shaikh claims that “production has actually crossed 2.9 million units in which 300,000-400,000 units are not shown in the official production figures.”
Despite tremendous achievement, the bike industry is still ruled by one model – i.e. the 70cc — whose production has been closed down all over the world decades back including India but in Pakistan it is running successfully with no sign of its closure.
Sabir is firm on his stand that the government has to provide a free hand to the auto sector besides ensuring uniform policies especially to the two wheeler sector.
Suzuki and Yamaha are literally struggling for their survival as they do not assemble 70cc bike which is the one of the main reasons of their unimpressive and thin volumes. Atlas Honda Limited (AHL) has become the market leader due to production of 70cc bikes, he said.
Bike sales have been showing positive growth as two leading assemblers (one Japanese and another Chinese) are going neck to neck by breaking their sales record. Atlas Honda alone sold 187,249 units as compared to 136,476 in July-August 2016. Sale of United Auto Motorcycle swelled to 67,023 from 49,464 units. Honda and United Auto Motorcycle sales in 2016-2017 stood at 960,105 units and 326,298 units as compared to 811,034 units and 262,773 units in 2015-2017.
The figures of Pakistan Automotive Manufactures Association (PAMA) do not give a true picture of countrywide sales of automobile. As per PAMA figures, total bike and three wheelers sales surged to 1.63 million units in 2016-2017 from 1.35 million units in 2015-2016 but in reality the sales figures are much higher.
The Ministry of Science and Technology projects overall bike sale at 2.9 million units by 2020-2021 including the share of Honda at 1.6 million units. The current fiscal year may end with overall bike sales of 2.52 million units with projected sales of share 1.52 million units of Honda bikes.
The Ministry says this is a wonderful graph of growth, because the government’s policies on one hand remained stable and favorable to the industry and on the other hand prices have been maintained steady by the OEMs, as they went for volume increase and profit there from. This enabled greater localization and additional gain in cost.
On the contrary, the consumers who could not afford to buy costly brand new cars are bound to purchase bike or used cars of very old models. This stance has been justified by the Ministry of Science to some extent. Based on the count of road motor vehicles per 1,000 inhabitants, Motorization Index of Pakistan has been calculated using statistics of passenger cars, jeeps, station wagons, and tax-cabs as given in Pakistan’s Statistical Year Book 2015 excluding two and three wheelers. It shows an increasing trend.
Pakistan has 15.6 vehicles/1,000 persons, India 18, Philippines 30, Indonesia 69, Thailand 206, and Malaysia 361. Thus the potential for growth and ameliorating the economy is very large.
Due to lower per capita, only 16 out of 1,000 people in Pakistan currently own a vehicle, which is significantly lower than other regional countries. It is obvious that the potential for growth is huge which will substantially ameliorate the economy of the country.
Sabir said surprisingly the Ministry did not focus much on the two wheeler industry as how the volumes had soared to new peak in the last few years based on one 70cc model. The Ministry also ignored to highlight the future potential based on the robust growth in bike sales. Perhaps the Ministry has taken the two wheeler sector lightly as no new investment is coming up as compared to at least nine new players in the car and light commercial vehicle segment in coming years.
The Ministry perhaps has not taken any feedback from the stakeholders in the bike industry besides ignoring tractor and heavy vehicles industries. The Ministry mainly debated the car sector and its future prospects relating to the Electric Vehicle, Sabir said.
According to Ministry of Science and Technology, the localization levels in cars and LCVs, motorcycles and tractors are satisfactory at the volumes that they are being produced. In the buses and trucks localization is low because very low volumes are produced. Similarly in case of SUVs the volume is low and thus the localization is low as well.
Because the models of cars change every five years volume are critical to increase localization. With each change in model beside the design, the technology is changed as well, which requires substantial investments of billions of rupees. In tractors and motorcycles as models do not change radically if at all, thus more localization is possible due to higher volumes.
Sabir Shaikh did not agree on the above points. He said localization level as per Ministry of Science and Technology is 50-70 per cent in cars and LCVs, 50-55 per cent in buses, 30-40 per cent in trucks, 80-92 per cent in bikes and 75-92 per cent in tractors.
Disagreeing on the fictitious localization levels, he said on two wheelers – the localization levels achieved so far hovers between zero per cent to 69 per cent, while in cars and LCVs the local parts’ contents ranges between 30-35 per cent.
The only three and the big three companies – Toyota, Honda and Suzuki – claim to have achieved higher localization but these companies must inform about Honda BR-V, Suzuki Wagon R, Suzuki Swift, Suzuki New Cultus new model and Toyota Fortuner and Hilux which are being rolled with negligible localization.
Meanwhile, due to burning of the building and records thereof on September 10, 2017, the Engineering Development Board (EDB) had faced with the daunting task of timely issuance of manufacturing certificate for 2017-2018.
EDB has informed the auto stakeholders on September 18 that the validity date of all the manufacturing certificates issued by the EDB under SRO 656(I)2006 has been extended to December 31, 2017 from September 30, 2017 as per policy decision to ensure smooth and uninterrupted operations of the automobile industry. Sabir Shaikh has welcomed the EDB’s timely decision of extending the validity date of manufacturing certificate.
Exclusive article on Pakistan’s motorcycles industry; published in Monthly #Automark magazine’s October-2017 printed edition