Audi AG expresses intent to assemble vehicles in Pakistan

[GreenFalcon]

Did you check the duty structure in US vs Pakistan. If I am not wrong duty in Us is about 5/6 percent, in Pakistan on fully assembled cars is what 100% + Excise 10% + regulatory + sales tax

Not sure about your background but I have worked 15 years in one of the largest auto manufacturer in Pakistan Auto Industry in a very high position in finance and have worked on multiple feasibilities for non Japanese auto assembly in Pakistan. I don't claim to know everything but the knowledge and experience that I have from the industry tells me it is going to be very challenging for any new comer specially European auto-maker.

There is a big difference in Japanese and European approach to business and investment, westerners don't have any patience for profit making from the investments. Their desired payback period is very short, Japanese think long-term.
What is the actual percentage of locally produced component in Suzuki, Honda and Toyota cars after almost 25/30 years of operations? Any newcomer would take a long time to reach that level (which is very much dependant on the market share and economy of scale - local production is cheaper only when you cross a certain threshold in volume) until then it would be ckd import which attract much higher import duty than raw materials.

Not saying it's not possible, it all depends on the OEM's short/long term objectives and their approach keeping in mind the sever competition from a well established Jpanese- minded industry.




I think they would sell more say 2000, but from OEM's perspective how much would they make from selling 2000 cars per year in comparison to the investment required? unless they use one of the existing OEM (Toyota or Honda) plant to assemble their cars. Even if their pure profit was $10,000 per car, 2000 cars would only give 20, million which would not even cover the bribes they would have to pay for going through the brutal approval process.

I respect your expertise and thank you for taking time out and explaining yourself instead of making a random rant like before. However, I still stick to my point that most people in Pakistan who can afford to have A car, can afford an Audi A3 or A4 if sold at the average international price.

 

[BABA AGHORI]

Pakistan needs to get the TOT in Engine and Transmission so these can be build in Pakistan.

This is gold --- Also should Audi shift it's R&D center too ?

 

[maximuswarrior]

The fruits of CPEC.

Most of the general public in Pakistan has money to afford Audis if available without the terrifying custom tax.
They can buy it with straight cash too

I've seen how ordinary Pakistanis dole up ridicolous amounts of money to buy Suzuki tin cans. They can purchase much better cars with that kind of money.

This is gold --- Also Audi should shift it's R&D center too ?

We should build a R&D center on how to put those big dots on the forehead. That seems science in itself. LOL

 

[Zarvan]

Audi AG expresses intent to assemble vehicles in Pakistan
By Bilal Memon
Published: November 15, 2016
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Sends letter of intent to Board of Investment through authorised importer in country. PHOTO: AUDI PAKISTAN

KARACHI: Pakistan is definitely on the international investors’ radar and the auto industry that has for long been dominated by Japanese players is poised for a face-lift.

In the latest development, German carmaker Audi AG has expressed its interest in setting up an assembly plant in Pakistan and, through its authorised importer in the country, submitted a letter of intent to the Board of Investment (BoI) for consideration.

Renault to start assembling cars in Pakistan by 2018, says Board of Investment

Ali Khan, head of automotive at Premier Systems Private Limited, which is the authorised importer for Audi AG in Pakistan, confirmed the development in an exclusive interview with The Express Tribune.

“Audi AG has expressed the interest via its authorised importer in Pakistan to set up an assembly plant in Pakistan,” Ali told The Express Tribune, adding that 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.

Audi AG is represented in different countries through either authorised importers or assembly/manufacturing plants – the latter investments coming after the country has shown enough appetite for the luxury brand. Pakistan is one of 57 countries where Audi AG is represented by an authorised importer.

“Audi AG first signed a memorandum of understanding with the Sindh Board of Investment (SBI) to consider Pakistan as a potential market in May this year. We studied the automotive policy (approved by the government in March) to see if it’s a viable case. After three-and-a-half months, we, on behalf of Audi AG, sent the letter of intent to BoI, expressing that we would like to assemble vehicles in Pakistan.”

Historically low interest rates, rising middle class and growing appetite for international brands have meant that Pakistan has become an attractive destination for foreign investors. French manufacturer Renault has already announced its intention to partner with Ghandhara Nissan to assemble vehicles in the country where consumers are desperate to see variety after being restricted for choice for decades.

Macroeconomic stability, improved security situation, and a government widely perceived as pro-business have further incentivised international companies.

“People are hungry to see a new brand. Lower interest rates have meant that vehicles are more affordable. The fact that 40,000 vehicles are imported into the country through the grey market means there is ample room for Audi.

“The reason why we would like to assemble cars in Pakistan is to help reduce the grey import of used cars. It means a warranty and an after-sales service within the country.”

Audi currently sells 900 imported units a year in Pakistan, a number Ali expects to go higher once the assembly plant is given the go-ahead by the BoI. The country incharge for Pakistan and Bangladesh also foresees the prices of lower-engine models to decrease in the range of 5-10% if assembled in Pakistan. “It depends on what the government offers us. But I feel a 5 to 10% decrease in prices should happen. With regards to the heavier engine models – over the 1.8L categories – I see a much bigger decrease of around 20%.”

Automobile industry: Pakistan woos Renault-Nissan in investment push

Ali’s explanation means the A3 model, currently priced at Rs4 million, could come down to between Rs3.6 million and Rs3.8 million.

The new auto policy

However, the official said the current auto policy needs to include a feature that caters specifically to brands like Audi, BMW or Mercedes. “There has to be something that caters specifically to these brands. Globally, this is the case. We do not compete on volume. The plant in Karachi could go up to a maximum of 5,000 units a year.

“One needs to understand that Audi is a luxury brand, therefore there are certain conditions attached in the assembling or manufacturing of our vehicles. Sourcing local components at this stage is just not possible, as there are neither vendors nor material available in the country. However, we believe given time; 10-15 years down the line Pakistan can be a country where any luxury manufacturer could source local components for the assembly / manufacturing of their vehicles. The vendor industry in any country adapts automatically to supply and demand forecasts.”

Published in The Express Tribune, November 15th, 2016.

Audi is booming in Pakistan every day you see more and more Audi Cars on roads from A3 to A4 to A6 and other models also SUV you find them on Pakistani roads. Pakistanis have lot money and they want to spend it. BMW and Mercedes and Audi have really bright future in Pakistan.

 

[GreenFalcon]

The fruits of CPEC.



I've seen how ordinary Pakistanis dole up ridicolous amounts of money to but Suzuki tin cans. They can much better cars with that kind of money.

Exactly, Agree with both points. These are but fruits of CPEC and if people have better options than the Corrolla, Civics, and Suzukis, then they will rather spend money on a luxury car which costs just a few lac more.

 

[Thorough Pro]

This is where you are wrong, very wrong. If that was the case there would be no Suzuki Mehran, Aulto, Swift, Santro and Evo's and high roofs running on the roads, people buy that junk for 7/800k because they can't afford 1.8/2.0m corolla or Honda, and even in Toyota and Honda top-end makes only a small fraction of total units sold, majority is XLI/GLI or whatever their current equivalent is. Suzuki is the largest selling car in Pakistan.

I respect your expertise and thank you for taking time out and explaining yourself instead of making a random rant like before. However, I still stick to my point that most people in Pakistan who can afford to have A car, can afford an Audi A3 or A4 if sold at the average international price.

 

[maximuswarrior]

Audi is booming in Pakistan every day you see more and more Audi Cars on roads from A3 to A4 to A6 and other models also SUV you find them on Pakistani roads. Pakistanis have lot money and they want to spend it. BMW and Mercedes and Audi have really bright future in Pakistan.

Damn right. It is time for diversification. Let as many automobile makers come in as possible. This is also clearly a sign that Pakistan is now an upwards trajectory. Car makers don't invest and build production plants in unstable countries. MashAllah. Very good signs for Pakistan. Without a doubt, we can thank CPEC for that. It is already opening doors for Pakistan and will continue to open many other doors.

 

[GreenFalcon]

This is where you are wrong, very wrong. If that was the case there would be no Suzuki Mehran, Aulto, Swift, Santro and Evo's and high roofs running on the roads, people buy that junk for 7/800k because they can't afford 1.8/2.0m corolla or Honda, and even in Toyota and Honda top-end makes only a small fraction of total units sold, majority is XLI/GLI or whatever their current equivalent is. Suzuki is the largest selling car in Pakistan.

Did you ever look out the window and see how many corollas, civics, and Land Cruisers are on the road? And you don't think these people can buy an Audi?

 

[maximuswarrior]

This is where you are wrong, very wrong. If that was the case there would be no Suzuki Mehran, Aulto, Swift, Santro and Evo's and high roofs running on the roads, people buy that junk for 7/800k because they can't afford 1.8/2.0m corolla or Honda, and even in Toyota and Honda top-end makes only a small fraction of total units sold, majority is XLI/GLI or whatever their current equivalent is. Suzuki is the largest selling car in Pakistan.

Suzuki is the largest selling car because it has become a household name for decades and decades. They have been allowed to dominate and monopolize the entire automobile industry in Pakistan. That was a very wrong move on our part. Time has come for Pakistanis to familiarize with other brands. Time has come to rectify this madness and diversify the automobile industry in Pakistan. You'll be surprised to see how many people are going opt for other brands. Perhaps not many Pakistanis can yet afford such cars, but there are quite a few who certainly can and these car makers aren't crazy. They have done their math in a population of 200 million people. That is not peanuts.

 

[Thorough Pro]

Not all of them, but definitely some of them. In my neighbourhood almost every household on my street can buy one and so can many others but that was not the point.

Did you ever look out the window and see how many corollas, civics, and Land Cruisers are on the road? And you don't think these people can buy an Audi?

 

[GreenFalcon]

Not all of them, but definitely some of them. In my neighbourhood almost every household on my street can buy one and so can many others but that was not the point.

Well Im sorry if you roamed off the point but people with Civics, Corollas, and Mehrans deserve a change and we'll worry about how many they sell, later.

 

[BABA AGHORI]

We should build a R&D center on how to put those big dots on the forehead. That seems science in itself. LOL

Cool.... Hopefully you will get it done in the right color and at the right place this time

 

[Devil Soul]

ive seen Lexus and Land Cruisers roaming around in Gujrat, Pakistan during my last visit and mind you Gujrat is not considered a big city, so yeah people in Pak can afford AUDI.....

 

[sparten]

With respect @Thorough Pro, I think your time as an insider has blinded you. Not picking on you personally, but car industry insiders In my experience are exceptionally myopic. Case in point Fortunner, it's sold like hot cakes since it began to be assembled in Pakistan, despite warnings

Audi, Renault, Fiat and maybe BMW are looking at the very big middle class market. Audi is going after the cohort which buy the Civics and the high end Corollas. That a huge market and one which will pay more as well.

 

[baajey]

seeing the comments above, I am inclined to think Pak is a high income country.
good going.
friggg, I m under debt after buying a Volkswagen.