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Pakistan Automobile Industry

GS Zhou

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Oct 10, 2015
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I can understand the frustration about the disappear of the Pakistan indigenous automobile program. In China, we have a similar pain, which is the cancelation of the Y10 (a big passenger aircraft similar to Boeing 707) program in 1980s'.

But seriously, it is not easy for a small , or a less industrialized country (sorry, no offense at all), to build and maintain its own automobile industry. For countries other than Germany, Japan, China, USA, Korea, France, Italy, India, there are very few other countries could have the luxury to build and continually maintain their own auto industry:
- Czech used to own Skoda, but it was acquired by Volkswagen
- Russia used to keep a strong auto industry, but Lada, the top Russian car brand, was acquired by Renault
- Romania used to own Dacia, but it was acquired by Renault as well
- Malaysia used to have Proton, but it was acquired by Geely.

Automobile, fortunately or unfortunately, is a very scale-sensitive industry. Imagine you spent 500M USD to develop a new model, the lifetime sales at 500,000 cars vs. 5,000 cars, the R&D cost allocated to each unit is different; or if you spend 500M USD to build a new plant with annual capacity at 100k units; production at full capacity vs. 5%, the manufacturing overhead each car needs to carry is also different. For the top players e.g. VW or Toyota, they produce more than 10 million cars a year; such huge base gives it a great advantage in cost control, and makes the success rate of new challengers from developing countries very vey few.

What's even worse is the "price discrimination" even from home country customers. For example, suppose a local Pak auto company launches a vehicle that is as good as a Toyota RAV-4, how much an ordinary Pak consumer is willing to pay for it? The experience from China market is, for a Chinese-brand car that is as good as a Japanese or German brand car, the Chinese consumers today only willing to pay 55% to 65% of the price of the equivalent JP or GE car. The ratio at years before is even lower.

And how about Toyota to lower the price as the response? Remember the cost benefit it gained from its huge size.

I definitely believe Pakistan is a country with a huge potential to release, and automobile is definitely the direction that worth of a huge investment. But be prepared for the likely challenge. Automobile is indeed a very very challenging industry.
 

ghazi52

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MG Motors receives Greenfield status to manufacture cars in Pakistan

SAMAA | Bilal Hussain
Jan 14, 2021



MG Motors receives  Greenfield status to manufacture cars in Pakistan




Greenfield status is granted to car assembly companies and includes tax and duty incentives to encourage new car companies entering the Pakistani market.

The company has already launched its compact SUV MG-HS and has revealed its plans to launch more cars including MG-ZS 1.5, MG ZS EV, which is fully electric and has 44.5 KWH of power, pick-up truck MG-Extender and SUV RX8.

The Engineering Development Board general manager has confirmed that MG Motors has been given the green-field status to manufacture cars in the country.

MG Motors in Pakistan is a joint venture between Pakistan’s JW-SEZ and Chinese giant SAIC, which now owns the British MG Motors. The company may also manufacture SAIC’s other cars too.

Haier Pakistan CEO and Pakistan Super League franchise Peshawar Zalmi’s owner Javed Afridi is a key stakeholder in MG Motors in Pakistan. He said in a previous interview that they had a good experience in Pakistan’s auto industry after they launched commercial vehicles such as trucks under the banner of JW-Forland.

In the ground-breaking ceremony of MG Motors recently, Javed Afridi said that they have established a joint venture with SAIC Motors, which means that the Chinese company also made investments in Pakistan.

MG Motors is one of the car companies that came to Pakistan after the government announced its Auto Development Policy 2016-21.

The policy will end in June 2021 and industry sources say car-making companies, called ‘new entrants’ since they came to the country after the policy was announced, have been trying to launch the maximum number of models before its expiry.

By launching cars during this period, the companies will be able to get tax incentives for five years under the government’s scheme. The policy aims to boost the auto industry and encourage competition. Japanese Suzuki, Honda, and Toyota were the dominant players before Kia, Hyundai, and Changan entered the market after 2016.​
 

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