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Ministry of Science and Technology Ignores bike industry’s potential in Pakistan

Muhammed Hanif Memon
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Ministry of Science and Technology Ignores bike industry’s potential in Pakistan

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

Suggestions and Solutions – New Auto Policy 2016-21

Muhammed Hanif Memon
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Suggestions and Solutions – New Auto Policy 2016-21

“We are a confused nation” the reflection of this phrase can be seen in every segment of our everyday life. New auto policy 2016-21 is one of an ideal example.

If we refer the document issued by the Government of Pakistan ADP 2016 – 21, we will find in article 4.3 under the heading of “Eligibility Criteria” in the section of new investment policy, it is mentioned that “The Auto Industry Development Committee (AIDC) and Engineering Development Board shall review results of the new investor policy once every two years and shall recommend modifications, if any. On this basis all concerned quarters are always refuse to make any change / amendments / improvement in the policy and also take stand that Government want to keep consistency in the policy to create confidence and trust among the new potential investor. However, as usual Government by herself break her own rules and did not reduce custom duty on the import of new cars as promised / mentioned in the new auto policy 2016 – 21 in article 3.1, under the heading “Tariff System for Cars, SUV’s & LCV’s (HS Codes 8703 & 8704) in section sub heading “Tariff Rationalization”, main heading is “Tariff Structure for Development of Automotive Sector”.

It is mentioned many times by the Government officials that existing automobile assemblers are over protected and Government want to create a healthy competition among the players. In order to provide an enabling environment, conducive to development and growth of the automotive industry a stable and consistent tariff regime is essential, on the other hand by not reducing the promised custom duty a signal of inconsistency has already given to the industry. On the other hand over protection to the existing players shall be continued.

The auto policy 2016 – 21 was announced in March 2016, so 2 years period shall be expired in march-2018. This is the high time that Ministry of Industry & Production and Board of Investment start working on the amendments and improvement in this policy and try to take in confidence to all stake holders.

THE PREMIUM OWN MONEY BLACK MARKET MENACE
Father of the nation, Quaid-e-Azam Mohammad Ali Jinnah in his first address to the constituent assembly on 11th August 1947 mentioned that “Black – Marketing in another cause, now you have to tackle this monster which today is a colossal crime against society in our distressed conditions”. The present scenario is the all three big Japanese brands having assembly plants in Pakistan are selling their vehicles on premium which is actually an act of black marketing the average premium is around (Rupees: Two Hundred Thousand) otherwise waiting period after booking is six months. Average annual sales of cars in Pakistan is 200,000 units. It means auto industry is creating a black market of 40 billion rupees per annum. This income is undocumented and tax free.

EXISTING PLAYERS
First of all please make some space for the existing players in new policy if they want to bring fresh investment and new models. Their terms and conditions could be different (Less Lucrative) in comparison to the all new investor and players.

BROWNFIELD WILL NOT BRING ANY FRUITFUL RESULT
Article 4.1.2, Category – B: Brownfield investment may be abolish from the policy as it brings no positive result as yet and even no hope in future. On the contrary this category created a confusion. If we see in broader spectrum this category is against the normal business practice, because it tries to support an industry which was closed due to inefficiency which could be management inefficiency, financial handicaps or product failure in the market. As a whole Brownfield industry did not contribute in national exchequer. On the other hand the industries which are contributing to national economy (existing players) are not allowed to get benefit from the new policy, I think this is a biased attitude. It is relevant to mention here that Pak Suzuki has submitted his new investment plan in December 2016 and seeking to get some benefit thru new auto policy which was rejected by the Government because no concession was available to existing player under new auto policy.

MKD / SKD OPERATIONS SHOULD BE ALLOWED
MKD / SKD (Medium Knock Down / Semi Knock Down) assembly category may be introduced for the new investor. Facilities and concessions to this category could be lesser / different than the facilities, concessions available to the CKD investors.We should realize our capabilities and market size. European Car makers do not see us as a viable option for CKD operations. If we want to create stir in Pakistan automotive industry MKD/SKD operations should be allowed.

CHECK VERIFY THE CREDIT WORTHINESS OF NEW ENTRANTS
It is usual practice in Pakistan to generate funds through advance booking of the vehicles. In 1994 Tawakal Motors scam has given a big blow to Pakistan automobile industry about 16000 people lost trier hard earned saving the accused were involved in KIA PRIDE car scam in which 16000 people were deprived of their cash through advance booking of vehicles all over the country. After collecting more than Rs. 800 million the accused failed to provide cars to their customers and fled to the U.S. So credibility and financial soundness of new entrant is of utmost importance. Submission of CIB, credit investigation report should make compulsory to all new entrantswhich isbeing issued by the State Bank of Pakistan. It is specially necessary for the consumer protection and generally for the smooth growth of automotive industry without financial juggleries and malpractices by the new entrants.

FRAME WORK ———– ??

It is mentioned in the preface of the automotive policy that “The Policy Provides Broader Guidelines”. It means that a frame work document should be prepared / issued by the ministry for the new entrants. Many issues need clarifications and explanations for the submission of applications by the new investors for the establishment of plant / factory under this policy. The following vital issues could be the part of the frame document.

a. Calculation of Concessional Period for Green Field Project

A Green Field Investor is entitled to import the non-localized and localized parts for the period of five years on concessional rate of custom duty. It may be mentioned when and how these five years shall be calculated means at what stage eligible time will start and when it will be finish i.e will it start from the date of approval or from the date of first launch of product.

b.Duty Free Import of Plant & Machinery

A prospective investor is eligible for duty free import of plant and machinery for setting up the assembly and/or manufacturing facilities on one-time basis.

A complete and comprehensive procedure may be explained in suggested frame work document that how and when this exemption could be availed and from which authority i.e Engineering Development Board, Board of Investment or direct from Ministry of Industry’s this exemption certificate will be issued.

It was verbally explained in different meetings by the Ministry of Industry & Production that the list of Plant & Machinery mentioned in SRO 656 shall be treated as the importable items. These relevant contents of the SRO 656 shall be made integral part of this suggested frame work document.

c. Agreement Between Investor and Government of Pakistan

It is mentioned in Auto Policy 2016-21, that an agreement will be signed between new entrant and Government of Pakistan. What is the format of this agreement.The contents of this agreement is not known. In our opinion this is a prime document which has to sign and agree between investor and Government of Pakistan. This document may not keep secret / confidential. It should be open document and its contents in shape of draft should be the part of framework document. Logically too, a prospective investor should know before the investment that what would be his rights and responsibility and what would be Government of Pakistan rights and responsibility.

d.50% Consession Duty of 100 Unit CBU

It is mentioned in the policy that “Import of 100 vehicles of the same variant in CBU form at 50% of the prevailing duty for test marketing after ground breaking of the project.” The concessionary period is five years in case of Greenfield project. If a company has plan to launch 5 different models on the basis of one new variant each year could it get approval for 100 units of each variant every year. Its methodology should be clearly mentioned in this framework document.

By Anwar Iqbal

New Motorcycles registrations in Karachi – Excise & Taxation department creating troubles without any logical reasons

Muhammed Hanif Memon
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New Motorcycles registrations in Karachi – Excise & Taxation department creating troubles without any logical reasons

It was widely touted that the fire to the Engineering Development Board (EDB) office last month would severely affect the auto production in Pakistan.

With the issuance of Manufacturing Certificates is having become a daunting task to carry out, especially with the deadline of 30th September having already gone. As a result, EDB had wrote a letter titled ‘Extension in the Validity Date of Manufacturing Certificate Issued for the Year 2017-18’ to the Secretaries of Federal Board of Revenue, all the provincial Excise and Taxation departments, and to the Director of Excise and Taxation, Islamabad, informing them about the extension in the date of issuance of manufacturing certificates to all the automotive manufacturers, till 31st December, 2017. After this letter all the provincial excise and taxation departments are authorize to register new 4 and 2 wheeler vehicles in country.

Motorcycle registrations in Karachi have been facing unnecessary delays and problems as reported by market sources, the Excise & Taxation department is causing the most trouble post-incident while other provinces of the country’s bike buyers are not facing such problems.

Apart from some major motorcycle companies, registrations of motorbikes have almost hit a dead-end in Karachi due to the Excise department’s incompetency and inflexibility in getting bikes registered, with customers facing extreme problems in buying and registering their vehicles against their names.

The EDB should, firstly, look into the matter, and try to amicably resolve it so that the customers buying bikes, specifically in Karachi, are ridden of the unnecessary burden of getting their vehicles registered. Moreover, the Excise department should also carry out a crackdown against the culprits, and question them of why the people of Karachi are being harassed by them.

As reported by Automark Magazine last month, the Software Technology Park (STP-1), Islamabad’s better known as the Awami Markaz in Sector F-5/1, recently caught fire, claiming the lives of two people and completely burnt to ashes.The STP-1 housed several tech companies and call centers, and offices of the Federal Tax Ombudsman, CPEC Center of Excellence, and the Engineering Development Board (EDB).

Report by Automark

Toyota and Mazda to create new electric car company together

Muhammed Hanif Memon
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Toyota and Mazda to create new electric car company together

TOYOTA is to join forces with Mazda in a pursuit to develop electric car technologies together

Toyota is joining forces with Mazda to create a new company which will develop electric cars. The two manufacturers are pairing with Denso Corporation to develop structural technologies for electric cars. Engineers from each of the companies will join together to develop the technology.

Toyota will own the lions share of the business with a 90 per cent stake while Denso and Mazda each take a five per cent. The new company is called EV Common Architecture Spirt Co Ltd. Cars produced by the new company will use the same platform that vehicle such as the Prius and 2018 Camry. 

Plans detail that a plethora of cars will be produced on the platform including SUVs, supermini and light trucks to name a few. Toyota has been manufacturing petrol-electric hybrids for a number of years now but has been pipped to the post by its rivals when it comes to introducing full EVs. 

Mazda revealed earlier this year details about its internal combustion petrol engine the SkyActiv-X which allegedly produced diesel-like fuel-economy and performance but less emissions. From 2019 the car manufacturer will add electrified vehicles into all of the models in its range. In the statement provided by the company it reveals three points that the company want to hit. 

The new company will engage in the following:

1. Research into the characteristics (common architecture) that define optimum performance and functions of EVs from the standpoint of both individual components and the whole vehicle.

2. Verification of component installation and vehicle performance realised by the characteristics  achieved in item 1)

3. Examination of the optimum concept for each car classification with regard to each component and each type of vehicle realised by achieving items 1) and 2).

Automark Magazine September 2017

Muhammed Hanif Memon
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Automark Magazine September 2017

Toyota investing $374 million at 5 existing US factories

Muhammed Hanif Memon
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Toyota investing $374 million at 5 existing US factories

Toyota Motor Corp. announced a $374 million investment Tuesday at five U.S. plants to support production of its first American-made hybrid powertrain.
The upgrades at Toyota’s factories in Alabama, Kentucky, Missouri, Tennessee and West Virginia are part of a previously announced $10 billion in U.S. spending by the Japanese automaker. It “underscores Toyota’s confidence in the capability and global competitiveness of our North American manufacturing,” Jeff Moore, Toyota North America’s senior vice president of manufacturing, said in a statement.
Toyota said 2.5-liter engines made in Kentucky and transmissions produced in West Virginia will be used in North American-made hybrid vehicles, such as the Highlander SUV manufactured in Princeton, Indiana.
Toyota will create 50 jobs at its Huntsville, Alabama, plant, which will build engines for its cost-saving New Global Architecture production strategy to share common parts and components among different vehicles. None of the other upgrades announced Tuesday will result in immediate net job gains.
The investment includes $106 million at the Huntsville plant, a $121 million expansion of a 2.5-liter engine capacity at Toyota’s Georgetown, Kentucky, plant, and $115 million to add hybrid vehicle transmission production in Buffalo, West Virginia.
Toyota also is investing $17 million to increase production of 2.5-liter cylinder heads at its Bodine Aluminum facility in Troy, Missouri. A $14.5 million upgrade at a Bodine plant in Jackson, Tennessee, will accommodate production of hybrid transmission cases and housings and 2.5-liter engine blocks.

“This investment is part of our long-term commitment to build more vehicles and components in the markets in which we sell them,” said Toyota Motor North America CEO Jim Lentz.

Chinese Motorcycle Brand Loncin Reveals 650cc Adventure Bike

Muhammed Hanif Memon
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Chinese Motorcycle Brand Loncin Reveals 650cc Adventure Bike

The Loncin DS8, as it’s called, uses a 652 cc engine that used to power the BMW 650GS and earlier F650 single models

Chinese motorcycle manufacturer Loncin has revealed a new 650 cc adventure touring motorcycle at the CIMA show recently. The new model, called the Loncin DS8, follows fairly generic adventure touring bike styling with a front ‘beak’ but it has only adventure styling without any real ‘adventure’ equipment. The frame is a tubular steel type with an aluminium swingarm at the rear and upside down front forks, and standard ABS. The DS8 is not intended for hard-core off-road use though and will be positioned more as a tarmac-only touring motorcycle.
The engine is the same as the BMW F650GS – the 652 cc, liquid-cooled, single-cylinder mill makes 50 bhp at 6,500 rpm and peak torque of just under 60 Nm at 5,000 rpm. The transmission is a five-speed unit and top speed of the 650GS is rated at around 160 kmph. The Loncin DS8 has a kerb weight of 198 kg. The bike gets an adventure-styled front fairing, dual headlamps and full-LCD instrument panel. So far, there’s no word on when the bike will be available on sale, or if it will be available outside China.
The adventure bike market in India is showing a lot of interest from consumers. Currently, the big adventure bike segment is dominated by the Triumph Tiger 800 models, and Honda’s newest adventure bike, the CRF1000L or Honda Africa Twin, has already sold out the first lot of bikes assembled here in India. A middleweight adventure bike, with a 650 cc engine could make for a very interesting product. Benelli is already working on launching its upcoming adventure tourer in India, the Benelli TRK502. The TRK502 will be launched sometime in 2018. Kinetic Engineering-owned Motoroyale is also working on bringing in a lightweight, 600 cc adventure model, the SWM SuperDual to India.

Automark Magazine August 2017

Muhammed Hanif Memon
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0
Automark Magazine August 2017

Honda will launch a small electric car in 2019

Muhammed Hanif Memon
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0
Honda will launch a small electric car in 2019

FRANKFURT AUTO SHOW-2017

Honda said it will launch a full-electric city car in Europe in two years. The automaker unveiled the Urban EV concept previewing the car at the auto show here on Tuesday.

“This is not some vision of the distant future. A production version of this car will be here in Europe in 2019,” Honda CEO Takahiro Hachigo said at the car’s unveiling.

Honda’s European boss, Philip Ross, said the EV was designed specifically for Europe, but it will be sold globally.

“We believe if we make a great car for Europe, then it will work elsewhere,” Ross said. The production car will be built in Japan.

The Urban EV was designed to appeal to European tastes with big wheels, a wide, sporty-looking stance and high-tech innovations such as cameras in place of side mirrors.

Ross said he expected EV sales to account for about 4 percent to 5 percent of the total market in Europe by 2019. The production version of the EV concept will make up a slightly smaller share of Honda’s sales in the region, putting it at about 5,000 units a year based on current sales.

New platform

The concept is built on a completely new platform and sets the direction for the technology and design that will appear on a future battery-electric Honda production model, Honda said. The concept car is smaller than Honda’s Jazz subcompact.

The car has slim A-pillars that give it a retro look and aid visibility from inside the cabin. Its interior was designed with a lounge feel.

The cabin has wood finishes and a natural gray fabric covering the bench front seat. A long display screen covers almost the length of the dashboard, while two smaller screen on the doors display the rear view from the two side cameras.

Honda also showed a near-production concept of its CR-V crossover with a full-hybrid drivetrain that will replace the diesel CR-V in Europe. It said the car will go on sale next year as its first hybrid SUV in the region.

Honda also said it aims to have electrified technology in two-thirds of its worldwide new-car sales by 2030. In Europe, where there is growing regulatory pressure for low-emission vehicles, the target year is 2025. This is because there is “particularly strong” interest in full-electric and hybrid vehicles, Honda said.

 

Report about Karachi property market by Bloomberg

Muhammed Hanif Memon
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0

An informative report about Karachi’s property market by bloomberg.

https://www.bloomberg.com/news/articles/2017-09-10/-land-mafias-and-the-battle-for-pakistan-s-booming-real-estate?cmpid=socialflow-facebook-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=facebook&utm_medium=social

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