Automark

Scooty…A word that has become one of the “buzz words” in Pakistan. Scooty in Pakistani market does not merely refer to a 2-wheeled vehicle but also possesses an empowering perception of its own. Scooties are especially meant for female transportation and with this initiative of commercialization of scooties, an invisible barrier of societal pressure on females would be broken. Although this perception is a taboo for many since there are women drivers in Pakistan who drive cars, even for a living. Nevertheless, with such an initiative, women of Pakistan would feel more empowered and equivalent to men.

Students, teachers and young professional are already much fond of this new initiative and are supporting this cause that would empower the female population of Pakistan. With the development of society, females are getting education on same grounds as men and marking their roles towards the betterment of Pakistan. Whether its education, health, welfare or social sector, women are striving hard to make themselves empowered. One of the biggest advantages that will happen on the society would be shift of male mentality, if such a movement penetrates.

There are different countries around the globe that have commercialized scooties for their female population. Even our neighboring country India has passed anti-harassment law for women who travel via public transports or on scooties. But will the same conditions be applicable in Pakistan?

It has become a disputed topic of what future does the scooty really hold? Majority of the female population belonging to the urban areas of Pakistan believe that it is a good alternative vehicle introduction for those who can’t really handle the hassle of a car. Many of the people also think that the effects of introduction of scooty in the society would be inappropriate and misleading.

Having viewed the statistics, I think that scooty DOES NOT hold a bright future for the long run until few changes are done on the roads of Pakistan. Having said that, the major factor that justifies this eerie statement as stated above is bad road conditions. Let alone rural but the roads of the urban areas of Pakistan are poorly structured which leads to many accidents daily. Although, the introduction of scooty would be a positive step towards facilitating 51% of the population BUT the roads need to be smooth, clean and safe for the common people, not just for the localities of DHA or other elite housing societies.

Having said that, I come forward with my second factor, that is safety. Belonging to the state of Pakistan, the mentality of men here has come out to be more dominant. To compete and excel in this technological era, boys and girls are brought up in the same environment but with different social values. Hence, the acceptance in this society by men to allow their homely females on the roads would be a tad bit unacceptable. This again takes my ground on the fact that our culture has many barriers that although our religion does not impose but is imposed by this culture that we belong to.

Within this culture, a third factor resides within that relates with the psychological state of mind of the people from this culture.  The human mind in general holds the property of differentiating between the good and the bad yet becoming biased, at times. This means that people of this culture majorly have strong roots and circulate the same among their younger generations. Hence, unacceptability/ intolerance to this new wave of culture will take time to settle. This opposition would be strong in the rural areas of Pakistan whereas the urban areas might accept it partially. The commercialization would although be a chain-breaking movement by the automobile industry for the female population but it is the mindset that needs rectification primarily.

by Zeenat Anjum, A.M Development, Ghandhara Nissan Limited.

Contact: [email protected]

About the writer:

The author is an engineer by profession but writes out of passion. She is a striving young MBA graduate who has an entrepreneurial venture of her own. Apart from that, she trains young individuals and “youth” about the digital world and its relation with tech industry. The author has her own personal blogs and you can view some of her write-ups on LinkedIn.

Yamaha has come Pakistan to test itself for second time. But there is a major difference in both situations. In first case Dawood group and Yamaha were jointly manufacturing and marketing the Yamaha motorcycles. But second chance is a better option for Yamaha. Yamaha Pakistan is single entity and has full control of steering of the car. Moreover, it has been also heard that the Government of Pakistan has supported Yamaha Pakistan well for their re-entry to Pakistan.

Now while I am writing this article, decent time has been gone, since the launch of Yamaha Bikes in Pakistan. So, let’s discuss whatsapp there.

Yamaha YBR-125 VS Honda CG-125:

Yamaha YBR-125’s one on one competitor is Honda CG-125. Now, do you think that this competition was won by YBR? Taking views of users, CG-125 can’t be compared with YBR-125 due to its pick-up, sound, easy handling (due to size), price, resale, spare parts & service availability. Above all, the huge network all over Pakistan. After all this, let me share a simple & short story. Many riders went to YBR as it was dashing bike in looks and was a good change in the market. Above all, it was Yamaha Brand name. Ultimately, this movement of riders resulted in betterment in sales graph.

One more factor which played important role is that as it was new thing, so no one had experience of riding YBR, so all of them assumed that it will be a better option in all respects.

Then we noticed the upward graph of accessories sellers. Do you know why? The users of YBR were feeling the lack of something that was an important part of their riding life i.e., the thrilling sound of Honda CG-125. Though they did changes to YBR bikes in order to fill their thirst but the bike, even with many additions was unable to meet the target. So, we witnessed many used Yamaha YBRs on sale at local markets and also online. This is one important reason that Atlas Honda has seen very good sales of heir CG-125 model in recent times.

Bike priced @ PKR.1,30,000/- but still incomplete:

The Yamaha YBR & YBR-G have been priced at highest level in 125cc category of Pakistani market. With this price it should have been a bike with EVERYTHING. But Engine Off button that was available in 1990 model Kawasaki GTO 110 & 125, 2008 model Piaggio Storm 125, 2006-17 Suzuki GS 150 is absent in Yamaha YBR. Pass-On light option is available in 2008-12 Piaggio Storm, 2015-17 Suzuki GD-110 but absent in Yamaha YBR.

YBR is believed to be a sporty design street bike in Pakistan but they did not offer a real sporty fuel tank cap. Whereas 2008-12 model Piaggio Storm has offered this in Pakistan.

Product should justify price:

Famous 150cc bike of Japanese brand is between PKR.135000 to PKR.140000. This bike is liked because of its biggest Pakistani made engine, giant looks, comfortable ride and brand name. This is GS-150 from Suzuki. A very famous and favorite bike that has turned into a cult, a 125cc bike of a Japanese brand is between PKR 105000 to PKR 110000. This very famous machine is known for its acceleration (aka Pick-Up), DurDur sound, easy handling, good resale, 3S country wide facility and brand name. This is CG-125 from Honda. Honda CG-125 has highest sales in its category, so we can say that it is justifying the price well. Moreover, once a bike has crossed One Lack mark, it must have guts to justify this Price Tag.

Considering both above, how one would justify YBR-125 (125cc) from Yamaha at price range of PKR.1,25,000 to PKR.1,30,000?

Did Yamaha Pakistan brought new techniques of business in Pakistan?

Can 70cc/100cc class thinking handle such products? Sometimes, the teams who have been working in a specific environment and with a specific style cannot change themselves easily. As per our information, the Yamaha Pakistan team has many members that have worked for Dawood Yamaha. As they have been managing Yamaha Royale 100cc for many years and then DYL 70cc bikes for quite some time, so it might be difficult for them to adjust themselves as per requirements of an international model(s).

What do you want? Conversation between Mr. CG, Mr. GS and Mr. YBR:

Mr. CG: Hello

Mr. GS: Nice to see you

Mr. YBR: Hello all, thanks for welcome

Mr. CG: What is your price Tag?

Mr. YBR: Around PKR.1,30,000

Mr. GS: I think you are 125cc

Mr. YBR: Yes, why?

Mr. GS: I am 150cc and priced at PKR.1,35,000

Mr. YBR: Mr. CG, why are you silent? What is your price?

Mr. CG: I am just wondering about you. What do you want? If you don’t know me well, then I must tell you that I am top selling Brand of Pakistan in 125cc category, infact I challenge Mr. GS(which is 150cc) too and feel proud because in most of times I am the winner. I am best in Power To Weight Ratio, my parts are available all over Pakistan at reasonable rates, mechanics play with me, riders enjoy with me. Though I am small in size but easy to handle, rider can do many stunts using a CG-125.

Mr. GS: I must tell you Mr. YBR, I am biggest bike of Pakistan with biggest engine, comfortable seat and suspension and I am here since 2006. Please tell us why are you here and what do you want?

Mr. YBR: Dear both let me be very clear. Actually I am here to compete with Mr. CG as both of us are from same category i.e., 125cc. I can say I want to defeat Mr. CG.

Considering my legacy, Yamaha Pakistan team priced me at PKR.1,30,000. They might have a belief that I could defeat Mr. CG. I am not the top selling brand here and don’t have even second highest sales but Yamaha Pakistan team might have thought that I can defeat you Mr. CG. Neither I can challenge GS nor I am good at Power to weight ratio, but Yamaha Pakistan team priced me at PKR.1,30,000.

I am beautiful, I am good looking, I am hot, I have alloy rims, disc brake, fuel gauge, and gear indicator. And I know both of you lack these facilities. Yamaha Pakistan team might have thought that these qualities would be enough to justify my price. Yamaha Pakistan team might have in mind that today, the customer wants these things, you know show-off.

Mr. GS: Oh really, I didn’t know that. I will talk to Pak Suzuki Team about all this. Bye guys.

Mr. CG: Considering everything you have, considering all models your company will bring against me alone, I want to make one thing clear that I am not a bike today, I have become a cult. You might feel good for the time being with the help of your brothers (YBR-G 125 & YB125Z) but ultimately I will rule. If you want to defeat me, you will have to capture the mind & heart of Pakistani customer who loves my sound and enjoys the Pick-Up I offer. I am not a bike only, I am a culture today.

Technically speaking, Yamaha can offer economical pricing options? Yes because of few things, I believe. Those few items that are common in their three models. Copying views of riders from different cities, I would share that the Engine, Chassis, Rear Cowling, Meter, etc are common in three models (YBR, YBR-G, YB125Z). Fuel tank, seat, handle grips etc are common in YBR and YBR-G. So, economies of scale philosophy should help Yamaha to offer better prices. This will really help Yamaha.

Lesson Learnt:

Now, considering all what has happened so far, has Yamaha learnt any lesson? It must be visible in their new project of YB125Z.

Let me quote a simple example of Mr. X@LHR. A boy Mr. X@LHR was impressed by Yamaha YBR-125 because of it’s stylish designing, so purchased the YBR after selling his CG-125. As the bike was new, he completed Running Period carefully. But, his feelings were pushing him for something. So, he changed the silencer with one that could give more sound. Later, when running period was complete, he started riding his bike faster. At that particular time, he was able to use the YBR at higher speed. But soon he realized that after buying a bike of around PKR.1,30,000 and then spending PKR.15,000 to PKR.20,000 on it, his thirst of riding a powerful two wheeler is still there. He tried his best to compromise but he could not, so he went out to the market and sold his YBR-125. And yes, he had to face bigger loss than he faced in case of CG-125. Mr. X@LHR sold a bike (CG-125) of around PKR.1,00,000 plus and invested around PKR.1,50,000 (or little less) for a new bike (YBR-125), but his thirst was filled by his first choice(CG-125).

Mr. X@LHRcould not be attracted by the features YBR has. Moreover, he spend PKR.50,000 more on YBR-125 to satisfy his heart but could not.

Has Yamaha Pakistan Team learnt something from past? Are the sales figures of Honda CG-125 coming down and YBR-125 going up? Do try to find out.

The lesson learnt is clear from the launch of YB125Z by Yamaha at a price of PKR.1,15,000 (which is again more than CG-125).

When a bike with alloy rims, disc brake, sporty style, Yamaha brand name could not find success against CG-125 (Honda), then has someone tried to find the main cause (of problem faced)? I being a rider and considering views of riders from all over Pakistan must share that there are few issues that need to be reconsidered. I know that it will be difficult to make changes for enhanced and faster acceleration but price can be an option to discuss for better results. I think Yamaha Pakistan Team can take YBR-125 as case study for expecting better results from YB125Z.

Exclusive article for Monthly AutoMark Magazine, published in May-2017 printed edition

Written by: Mr. Muhammad Zahid Iqbal Malik, Founder & Head of Safe Riding – Road Safety Dept. of Pakistan Bikers Club (Since 2007)

Darson Industries Pvt Ltd Wazirabad, manufacturer of automotive rubber hose pipes and rubber moulded parts signed a collaboration agreement with Butsch GmBH Germany for sales of automotive rubber products to vehicle manufacturing industry in Germany and other European Countries. Mr. Thomas Butsch, CEO of Butsch GmBH, a leading company in Europe which had 12 million Euro Turnover in 2015-16 and Mr. Abdul Hamid, CEO Darson Industries signed the document at Pakistan Pavilion in Hannover Messe 2017 organized by Engineering Development Board (EDB) in collaboration with commercial office, Embassy of Pakistan, Berlin.
The signing ceremony of the agreement between Darson and Butsch was presided by H.E. Jauhar Saleem, Ambassador of Pakistan in Germany. Mr. Jehangir Mushtaq Virk, Commercial Councellor Berlin and Mr. Asim Ayaz organizer of Pakistan Pavilion from EDB´s side also witnessed the ceremony as official observers. Under the agreement, Darson will be the manufacturing hub while Messrs Butsch will act as holding, distribution and customer services representative in Germany. The Darson and Butsch synergy will provide Darson with in roads to the European Auto makers. Darson and Butsch will together develop the products and place them in serial production.

It is pertinent to mention that the two companies met at Hannover Messe in 2006 and 2007 organized by the Engineering Development Board of Pakistan. The automobile industry of Pakistan has started benefits from participation in Hannover Messe 10 years ago i.e. when the two companies met for the first time.Thereafter, the two companies at several occasions reviewed the possible collaboration opportunities – it was only last year i.e. Pakistan´s participation at Hannover Messe 2017 that the efforts and thoughts of both the companies started to consolidate.

Chairman, Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), Mr. Mashood Ali Khan, who is participating in Hannover Messe 2017 as an organizer of group participation from PAAPAM, highlighted that promotion of engineering sector needs efforts on long term basis. The Darson-Butsch collaboration is an example of the continued participation which will increase the confidence of German and other European Buyers on Pakistani Auto Part Manufacturers as well. Chairman PAAPAM appreciated the continuous efforts of EDB which have resulted in converting opportunities into real business.
The ambassador congratulated representatives of both, Darson and Butsch for entering into a new business relationship. He also lauded the efforts of EDB for promotion of engineering sector and emphasized that Pakistan can only enhance its exports significantly through enhancement of engineering exports. He appreciated EDB for its efforts and urged that Pakistan´s Engineering Sector should be supported on long term basis for market development initiatives such as support for participation in engineering trade fairs.
#automark #pakisan #germany #hannover

Hyundai Motor Company plans to set up a car assembly plant in Pakistan in a joint venture with local textile firm Nishat Mills and Sojitz Corporation Tokyo another local tractors assemblers, Millat Tractors shall also be minority share holder.

Hyundai used to assemble cars in Pakistan until 2004 but withdrew after their local partner Dewan Farooque Motors Limited went into financial turmoil and forced to close the operations of its automobile assembly plant.

The following announcement was made by the Nishat Group.
“The board of directors of Nishat Mills Limited has resolved to enter into a memorandum of understanding with Hyundai Motor Company (HMC), Seoul and Sojitz Corporation, Tokyo for negotiating and establishing a framework for setting up a green field project for assembly and sales of HMC passenger and one ton range commercial vehicles in Pakistan,” said a notice issued to the Pakistan Stock Exchange.

“The (South) Korean car maker wants to first start the assembly of small cars that could compete with the existing (Japanese) assemblers already operating in this market. Local; partner i.e Nishat group is trying to convince them to also bring electric and hybrid cars.

The group has already acquired the land for the plant near Faisalabad and will invest $120 million in the project. Nishat Group will have 42% stake in the new company with Millat Tractors holding 18% and Sojitz Corporation – a Japanese firm, 10%. The remaining share holding will go to country’s stock market.

Last year, the government unveiled new auto policy to attract investments into assembling and manufacturing of vehicles in the country, currently ruled by three Japanese automakers, namely Suzuki, Honda and Toyota.

Besides, there is still a huge demand of automobiles in Pakistan. “Pakistan’s car penetration of 13 vehicles per thousand persons is significantly lower than the regional average of 162”. The report said there is a strong potential for automobile growth due to higher disposable income and low interest rate environment.

Nishat Group
Nishat group of companies is a premier business house of Pakistan. The group has presence in all major sectors including Textiles, Cement, Banking, Insurance, Power Generation, Hotel Business, Agriculture, Dairy and Paper Products. Today, Nishat Group is considered to be at par with multinationals operating locally in terms of its quality products and management skills.

Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951
The Company’s production facilities comprise of spinning, weaving, processing, stitching and power generation.

Now Nishat Mills is officially moving into the automobile industry through its union with Hyundai Motors. The Nishat Group, owned by the Mansha family has its toes in banking, cement power, and many other sectors and now is broadening its horizons by entering into the auto industry.

The chairman of the group is Mian Muhammad Mansha who is a prominent Pakistani industrialist and entrepreneur with major businesses setup in Pakistan. With decades of success to his credit, he is among the highest tax paying individuals in Pakistan. He is also the Chairman of MCB bank and Adamjee Insurance Company.

Sojitz Corporation
Sojitz Corporation was formed out the union of Nichimen Corporation and Nissho Iwai Corporation, both companies that boast incredibly long histories. In April 2003, Nichimen Corporation and Nissho Iwai Corporation established a joint holding company, integrating their businesses the following year to become the Sojitz Group.

Nichimen and Nissho traced their history back to three trading company titans who played an instrumental role in the development of modern Japan. These trading companies existed, in some form, throughout the opening of Japan, the industrial revolution of the Meiji and Taisho Eras, the nation’s postwar recovery, and its rapid growth thereafter:

For more than 150 years, their business has helped support the development of countless countries and regions. Today, the Sojitz Group consists of approximately 400 subsidiaries and affiliates located in Japan and throughout the world, developing wide-ranging general trading company operations in a multitude of countries and regions.

Hyundai Motor Company
H.M.C is a South Korean multinational automotive manufacturer headquartered in Seoul, South Korea. The company was founded in 1967 and, along with its 32.8% owned subsidiary, Kia Motors, together comprise the Hyundai Motor Group, which is the world’s fifth largest automaker. However Hyundai was forwarded as small construction firm by Chung Ju-yung in 1947.

Hyundai is itself the fourth largest vehicle manufacturer in the world. Hyundai operates the world’s largest integrated automobile manufacturing facility in Ulsan, South Korea, which has an annual production capacity of 1.6 million units. The company employs about 75,000 people worldwide. Hyundai vehicles are sold in 193 countries through some 5,000 dealerships and showrooms.

The company’s first model, the Cortina, was released in cooperation with Ford Motor Company in 1968. When Hyundai wanted to develop their own car, they hired George Turnbull in February 1974, the former Managing Director of Austin Morris at British Leyland. He in turn hired five other top British car engineers. In 1975, the Pony, the first Korean car, was released, with styling by Giorgio Giugiaro of Italy, Design and power train technology provided by Japan’s Mitsubishi.

Hyundai Pony was also imported in Pakistan in limited quantity but could not be successful because of Japanese brands domination in Pakistan market.

Hyundai got first break thru into Pakistan market during Pakistan’s famous yellow cab scheme 1993. The Prime Minister Nawaz Sharif introduced ‘Yellow Cabs Scheme’ to modernize taxi service in Pakistan while giving jobless an option of self-employment.

A local importer / distributor M/s. Kandawala Motors, introduced as a cab was the Excel sedan by Hyundai Motors. The car came with a 1.3-liter petrol engine which is very economical yet powerful. Hyundai Excel had simple gear box which is better because it has five-speed manual transmission.

Hyundai had a unique thing which other cabs didn’t, this round shaped taxi sign resembling M.A Jinnah tomb in Karachi. While most of the cabs have been privatized, you can still spot handful Hyundai Excels yellow cabs in Karachi. Unfortunately the yellow cab scheme was badly failed but it becomes a fortune for Hyundai as Hyundai name as a good car, was registered / established into the Pakistani customer’s mind.

Dewan Farooque Motors Company Ltd – Former Assemblers / Licensee of Hyundai Motor Company Korea, in Pakistan
Dewan Farooque Motor Company Limited (DFML) was incorporate in December 1998. DFML made agreements with Hyundai assemble and sell their vehicles in Pakistan.

In the year 1994 DFML launch first Hyundai vehicle in Pakistan. It was a light commercial vehicle with One Ton load capacity. DFML gives it local name “Shehzore”, It is called “Porter” in Korea. The launching of this vehicle becomes a success symbol for DFML. Shehzore became market leader in its segment and defeated Toyota Hiace which was market leader at that time.

Subsequently Hyundai Santro hatchback four doors car having 1000 CC engine was launched in Pakistan by DFML in the year 2000. This was first generation Santro. This model was totally failed in Pakistan. However in the year 2003, DFML launched second generation Santro. This model was accepted by the customers and was successful in Pakistan market.

DFML was the part of Dewan Group, Dewan acquired Pakland Cement in 2004 for Rs. 1.1 billion in cash soon after which Dewan group started to post losses cascading into problems for the entire group in just 24 months. Things kept turning from bad to worst and by 2008 were vanished from mainstream news. Dewans were eventually declared the defaulters of over Rs. 45 billion. Resultantly assembly and marketing of Hyundai vehicle in Pakistan was also stopped.

What would be the future of DFML . . .

The following was officially announced by DFML in September – 2016.
“Dewan Farooque Motors is restarting its production by end of October 2016, according to an official announcement made to shareholders on Monday. Dewan Farooque Motors will be manufacturing vehicles of different segments under toll manufacturing arrangement for which the installations of jigs and fixture are in the process for assembly plants. The company also has entered into a toll manufacturing agreement with Daehan—Dewan Motor Company, which is a joint-venture between Yousaf Dewan Companies and KOLAO Group based in Lao PDR and South Korea. The revival would likely to see the re-launch of Shehzore 1-Ton single rear wheel truck and Shehzore 1-Ton truck. The company planned to launch passenger cars, light commercial vehicles and SUVs in collaboration with KIA Motors Korea in years to come”.

In current scenario both Korean automobile giants i.e Hyundai and KIA officially tied up with Nishat Group and Y.B Group. Now the question is how can DFML will be able to re-launch “Shehzore” which is basically a Hyundai product.

Amid inconsistency in the policy as always blamed by the existing auto assemblers – the new foreign auto makers are highly optimistic for a promising future of Pakistan’s car and heavy vehicle sectors especially.

They see a robust demand of cars in view of low interest rates and rising standard of living of middle class. For heavy vehicle sector they pin hopes on additional demand of heavy vehicles depending on the success of China Pakistan Economic Corridor (CPEC).

Pakistani print media in the last six to eight months have run a series of lead stories relating to the intention of European and Korean car makers dying to take a plunge in the market dominated by Japanese car makers like Toyota, Honda and Suzuki.

In heavy vehicle segment Hinopak Motors hold big a market share in trucks and buses followed by Isuzu and Nissan.

Some Chinese brands are looking forward to make a deeper inroad in view of CPEC related demand but Japanese brands are far superior in technology and quality than Chinese brands.

Arrival of new comers is certainly big news for the car buyers who are not satisfied with the products being rolled out by the Pak Suzuki especially. Vending industry must be excited for getting additional orders for part making in case more local assembly plants are set up. Besides, the new entrant arrival would also open new job avenues especially in the vending industry.

PML-N government deserves the credit of making friendly new entrant auto policy on which foreign players’ are ready to cash their luck in Pakistan’s volatile economic and political situations.

PML-N appears highly satisfied to win the election 2018 despite its unfulfilled promises on new power generation plans and insecurity situation. In case the ruling party again comes into power then it will really further prove helpful for the world car giants who have already shown their interest and some of them have inked MoU with local partners besides purchasing land for the new plants.

However, in case the Pakistan Peoples Party takes control of the country in 2018 polls then it is hard to say whether the new government will maintain the policy of PML-N government of encouraging foreign investment in auto sector or it will change or amend the policy.

Certainly the result of 2018 elections must be in mind of the foreign car and heavy vehicle assemblers who will also decide whether they would honor their past commitment and confidence which they have shown now to the PML N government or will roll back out in case other than PML N government comes in power and introduce changes in the policy.

Sources said that new entrants are slowly and cautiously moving towards their future plans in view of 2018 elections and its results. However, purchasing land by car giants is not a heavy burden on them as land prices have always paid very high in Pakistan especially in PML-N government rule since May 2013.

However, the existing car assemblers have always blamed inconsistency in the policy of various governments due to which they (especially Pak Suzuki and Indus Motors) could not introduce new models.

The governments have also encouraged used car imports which definitely eroded the market share of existing assemblers. Despite this huge interest of European and Korean players to set up assembly plant is surprising as they are relying on incentives which the new auto policy 2016-2021 has promised.

Perhaps the buyers’ rising tilt towards used cars and their thriving imports have lured foreign players to tap the potential.

Contrary to the reality that bulk of imports comprise of used 660-1,000cc vehicles the European and Korean car assemblers intend to introduce their low engine power vehicles which will compete with used cars as well as local made Japanese cars.

One of the things to lure foreign car makers is absence of any strict action by the previous and current governments on increasing car prices by the assemblers. The governments had never taken to the task the assemblers for pushing up prices three to four times a year on currency parity and other excuses. Even the on money menace still exists due to delivery of vehicles in three to six months.

It seems that these players are not interested in taking a big slice or give a tough time to the existing players. They will initially focus on the volume of 40,000-50,000 units which the used car importers have captured by bringing in three years old vehicles under various schemes introduced by the government.

As the Budget 2017-2018 is round the corner, used car importers have started building up pressure on the government for more concessions so that consumers can get easy access to the high quality used cars. On the other hand, local car assemblers will do their best to avert the pressure of used car lobby urging the government to further tighten used car imports so that their market share could improve.

Chairman All Pakistan Motor Dealers Association (APMDA), H.M. Shahzad urged Finance Minister Ishaq Dar that the car assemblers continue fleecing the people in the shape of advance payment at the time of booking of a car and delivering the vehicle in three to six months. As a result of delays in car delivery, the black marketer charges a hefty premium “on money” from the people.

He said assemblers arbitrarily increase the price of their cars as and when they desire. After allowing Import of three years old car model – the local assemblers are enjoying monopoly on prices besides providing limited choices for the buyers.

Shahzad urged the government to allow commercial imports of used vehicles of up to five years of age limit in addition to existing import of vehicles under various schemes. It would also bring the import of used vehicles business into the tax net and help the Government expand its tax base.

He said the local industry had never passed on the impact of depreciating Yen to the consumers in shape of price cut in cars.

He suggested the government to impose a fixed rate of duty on the import of used vehicles of engine capacity of above 1,800cc.

The government, sources said, is unlikely to accept demands of the used car importers in new budget as it could not afford to ruin its plan of encouraging investment from European, Korean and Chinese assemblers.

However, the incentives for new entrants appear highly attractive for which the existing assemblers like Pak Suzuki, Al Haj Faw Motors and Dewan Farooqui Motors are struggling to get same on which the government has so far not given any green signal.

Pak Suzuki with an investment plan of $660 million has sought same benefits/incentives for two years from the start of mass production of new models instead of five years granted to new entrants in the Auto Policy 2016-21.
Al-Haj Faw had requested for new entrant status under the new ADP 2016-2021 as Greenfield. The company opined that the new policy deprives companies of any benefits and as such it would not be able to compete with new entrants.
Daehan Dewan had requested the government for granting Brownfield status to their unit under new ADP 2016-2021 for production of Daehan, Ssangyong and KIA range vehicles.
The cases of Al-Haj and Daehan Dewan were referred to Ministry of Industries highlighting the facts that though these are not exactly within the strict parameters of ADP 2016-21, both matters present opportunities for investment, competition in the market and thus might justify special treatment.
However, the ministry felt the treatment can trigger similar requests from others and company specific modifications in the ADP 2016-21 at this stage as it would counterproductive.
Perturbed over lukewarm response to earlier requests, Pak Suzuki said it would review its decision to invest $460 million if the government fails to respond to its request for incentives until April.
Pak Suzuki, which has purchased the land, said total promised investment is around $660m in which foreign direct investment from Japan is $250m. PSMCL is going to arrange $210m through its own funds and bank borrowings while vendors will invest $200m. This is a one-time investment. The plant’s completion will be in 18-24 months.
Coming to new entrants, leading business groups, who had made huge profits in their decades old business, are now ready to take the auto market by storm.

Nishat Group, which has recently entered into an agreement with Hyundai Motor Company to set up a car assembly plant in Pakistan, is planning to introduce electric and hybrid passenger cars. It wants to first start the assembly of small cars to compete with the existing Japanese assemblers.
The company would import these cars in the beginning and later also start assembling them locally. Nishat Group would invest $120m in the project that will be set up in an industrial zone near Faisalabad. The company has acquired land for the plant.
Nishat Group will have 42 per cent stake in the new company with Millat Tractors holding 18pc and a Japanese firm 10pc. The remaining shareholding will be offloaded on the country’s stock market.
Lucky Cement, a company owned by one of Pakistan’s largest business conglomerates Younus Group, has partnered with Kia, yet another Korean car brand, to assemble cars as well as commercial vehicles in Karachi.
French car maker Renault plans to invest $100m in the Ghandhara Nissan plant to bring its brand into Pakistan.
It is not clear how Hyundai and Kia would create new interest among the customers who had already experienced these vehicles introduced by Dewan Motors which later wrapped up these projects in late 2000s due to financial problems. Hyundai and Kia had low resale value at that time.
German car maker Audi AG expresses intent to assemble vehicles in Pakistan by setting up a plant. Through its authorized importer in the country, it has submitted a letter of intent to the Board of Investment (BoI) for consideration.

The land for the plant has been purchased in Korangi, near one of Pakistan’s biggest industrial estates, and would mean a fresh investment of over $30 million which looks meager as compared to investment by Korean counterparts.

Audi representative in Pakistan foresees the prices of lower-engine models to decrease in the range of 5-10 per cent if assembled in Pakistan. With regards to the heavier engine models – over the 1.8L categories – he sees a much bigger decrease of around 20pc.
He means the A3 model, currently priced at Rs4 million, could come down to between Rs3.6 million and Rs3.8 million.

It is not clear how Audi would survive on very low volume of sales per year for which it needs special incentive from the government. Due to lack of volumes – some assemblers had already packed up their business in Pakistan while existing assemblers say that they could not invest in new models due to thin growth in volumes and inconsistency in government policies.

Even low volume would also not attract any local vendors. The German car maker would require at least 15-20 years to procure local components from the vendors depending on attractive sale volume.
BMW is planning to launch lower end and mid range models in Pakistan, which is surprising that how a luxurious models can be cheaper.
As per media reports – BMW hasn’t decided to set up a local car assembly plant though.

The major attraction for foreign companies is the new policy which allows these investors to import tax free manufacturing plant equipment and pay less taxes on import of parts when assembly starts plus various other incentives that can help new entrants in the automotive industry to set up their operations in Pakistan.
National Logistic Cell will invest in auto sector with German collaboration in order to cater the rising demand of heavy commercial vehicles following the commencement of China-Pakistan Economic Corridor (CPEC).
NLC has planned to install production plants [in Pakistan] with German Company to produce prime movers.
The NLC will initially be investing Rs500-700 million to install a production plant in Pakistan in a bid to manufacture heavy commercial vehicles in collaboration with German MAN Truck and Bus Company.
In the first phase, trucks will be produced to meet the requirements of Pakistan Army while in the second phase — keeping in view the rising demand under CEPC — heavy commercial vehicles will be produced as well.
Around 700-1,000 heavy vehicles will be produced annually and later on the production capacity will be enhanced accordingly.
Volkswagen Commercial Vehicles is in final talks with Premier Systems Private Limited – the authorised importer of Audi vehicles in the country – to set up a manufacturing/assembly plant for its Amarok and T6 (transporter range) models.
On one hand the government is attracting foreign car players with its new auto policy and on the other hand the Government has made a change / amendment in new auto policy through SRO 483 dated 29th June, 2016 which states that it is compulsory every light commercial vehicle assembler has to establish ED Coat Painting system in his auto assembly plant.

Al Haj FAW has invested around Rs 400-500 million for the establishment of ED painting system including the cost of land and material. This ED painting system consists of eleven tanks and backing system can bake more than one vehicle at a time. The dipping tanks and baking ovens size is too huge that can even paint and bake Prime Movers cabin.

One thing is now sure that every new entrant would need to invest Rs400-500 million at least for ED painting facilities as per government’s directives. In case the new entrants fail to achieve desired sales volume — the plant and machinery investment coupled with ED paint facility would go in waste.This is certainly a risk on which the new entrants need to ponder.

By team Automark, Exclusive article published in Monthly Automark Magazine’s April-2017 printed edition