Auto/Bus/Truck Monopoly in Pakistan & Future Cars Entry

[Asian.Century]

Auto policy: Tariff protection plan likely to new players

By Zafar Bhutta

Existing car manufacturers are lobbying to impose ban on used cars which could lead to further increase in prices.

ISLAMABAD: The government is considering introducing a tariff protection plan for new entrants in the automobile manufacturing sector in auto policy, to break the monopoly of existing players.

“We may give tariff protection for five or seven years to new entrants in the auto industry to break the monopoly of existing players who are fleecing consumers by selling vehicles based on obsolete technology at high prices,” sources said, adding that the government now wants to create an environment of competition by bringing more auto players in Pakistan which may result in decline in vehicle prices.

Officials said that other countries had many players in their auto industries, because of which prices are kept low, unlike in Pakistan where due to the controlling share of a few players prices are generally high. He said that the government had introduced a policy for new entrants in the motorcycle industry, and had a plan for car manufacturers which will bring new investment in Pakistan.

The government decided to introduce a new auto policy after it noticed that despite enjoying incentives from the government, car assemblers continue to sell at high prices. They are also earning hefty profits on the advance deposited by consumers before their cars are even delivered.

In a meeting held on October 2, the Economic Coordination Committee (ECC) of the cabinet criticised car assemblers, saying they had been getting incentives for several years but did not meet the commitment to the government.

The meeting was told that an auto policy was being formulated and its first draft was ready. The ECC, however, stressed that the draft should be based on a thorough review of the facilities being offered to the auto industry, the need for new entrants, existing duty structure for import of motor vehicles, standards set by the Engineering Development Board, and should meet requirements of a long-term policy framework. The draft should also take into account proposals from the assemblers, dealers and vendors of the auto industry, it said.

The ECC decided to constitute a committee comprising the minister of water and power, chairman Board of Investment, chairman Federal Board of Revenue, industries secretary and chief executive Engineering Development Board to finalise the policy draft within 45 days and submit it to the committee.

Official said that the committee was considering different proposals and a meeting would be held soon with stakeholders to give final shapes to the new auto policy.

Existing car manufacturers are lobbying to impose ban on used cars which could lead to further increase in prices. However officials said that the government had no plan to impose a ban on used cars.

He said that car manufacturers had been earning huge profits on the advance money deposited by consumers. Now, the government is working on a plan to reduce time of delivery so that consumers are not exploited.

The apex economic decision-making body in its meeting held on October 2 had expressed concern that the car assemblers were exploiting the consumers as they were unduly keeping the latter’s advance for several months and earning profits on that before actual delivery.

The ECC took notice of negative growth in the automobile sector, which had not been recording any growth for many years notwithstanding a host of incentives provided by the government.

Not a single car manufacturer in the country had been able to complete its deletion programme even after extension in the timeframe. Moreover, the meeting noted that products of the assemblers were costly and based on obsolete technology.

Published in The Express Tribune, November 15th, 2013.

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[Asian.Century]

You gotta be much richer to own a car!

BY KASHIF ABBASI

Pakistan, the land of the pure, is not meant for the poor. Despite its large population living in poverty apart from the sharply vanishing middle class, it is a place where survival of the richest is ensured. There is a big monopoly of the three local car assemblers – the Indus (Toyota) Motor Company Limited, Pak-Suzuki Motor Company Limited, and the Honda Atlas Cars Limited in Pakistan.

Cars are no exception in this country where skyrocketing inflation has been punishing its citizens to unprecedented degrees. In the absence of an effective and respectable mass transit system even in the major cities, cars are the only realistic option for families to move around.

With the government’s recent decision to reduce the importable age of used cars from five to three years, the common man will be left with no choice but to pay more. How? Because three-year-old imported cars cost significantly more than the five-year-old ones. Alternative? New cars marketed by local assemblers at much higher prices.

The late incompetent PPP-led government’s decision to limit the imports of used cars brought dividends for local industrialists, while limiting people’s access to better-quality, cheaper cars, but enhanced the three cars monopoly.

Official sources told Pakistan Today that the Ministry of Industries, in connivance with local car assemblers, had made the decision to promote the interests of multi-billionaire industrialists at the expense of the common man’s hard-earned money.

On the other hand, used-car dealers complain that their businesses would suffer badly. “The reduction in the age limit of importable cars would badly influence the used cars’ business in Pakistan. In Japan, a three-year-old car is way more expensive than a five-year-old one. Our people cannot afford purchasing a three-year-old imported car,” said HM Shahzad, chairman of the All-Pakistan Motor Dealers Association.

Criticising the eventual monopoly of the three local car assemblers – the Indus (Toyota) Motor Company Limited, Pak-Suzuki Motor Company Limited, and the Honda Atlas Cars Limited – after the government’s decision, Shahzad said that it was sheer injustice with the people of the country as they were now forced to purchase only the locally assembled cars. “The government claims that the local industry is under threat from the imported cars business, but in fact during the last four years up to June 2012, the local assemblers have made large profits,” he said.

He said that after the government’s decision, people would be forced to purchase the poorly-manufactured 800CC Suzuki Mehran for Rs 650,000, and Suzuki Cultus for Rs 1 million. He said that both of these cars had become obsolete in Japan several years ago.

Giving details, Shahzad said that between June 2011 and June 2012, as many as 54,000 used cars had been imported and the government earned Rs 30 billion in customs duty. He said the government’s decision would not only deprive the middle class of affordable cars, but will also deprive the national exchequer of Rs 30 billion every year.

Hasan Danji, another used-cars’ dealer, said the powerful “Auto Mafia” would further increase the prices of cars after the government’s decision to reduce the age of importable cars. “The monopoly of local assemblers will be firmly established and we should now be ready for a new increase in car prices and black marketing,” he said.

Danji said the “Auto Mafia” was increasing car prices under the pretext of Rupee-Yen parity. “But in reality, they are purchasing parts from China, Thailand, Malaysia and Singapore, and not from Japan,” he said. “One auto part which is being sold in Japan for $10 is being purchased by our assemblers for $2 from China. So the prices of cars should be reduced, not increased,” he added.
He said that previously the Pakistani customers could choose between 18 available models of used imported cars of 650CC, but now they only could buy Suzuki Mehran in this price range. He said that while on one hand the government was complaining about the shortage of CNG, but on the other it had restricted the import of used cars with smaller and more efficient engines.

HITTING OVERSEAS PAKISTANIS:
A senior government official told Pakistan Today that the decision would cause instant loss to overseas Pakistanis engaged in exporting used cars to Pakistan, particularly those who had booked the consignments in advance. “The overseas Pakistanis, who have purchased cars worth millions of dollars for Pakistan and are holding them for shipment in Japan, will go bankrupt instantly. In addition, thousands of Pakistani families engaged in this business in Pakistan will lose their source of livelihood,” he said.

MONOPOLISED: The Competition Commission of Pakistan (CCP), a subsidiary of the Finance Ministry responsible for breaking the monopoly of business cartels in the country, also believes that there should be a five-year age limit for used cars instead of three years. “Our domestic car manufacturers are not exporting firms; they are just catering to the domestic market. Therefore this may result in a loss of consumer surplus, and producers would gain at the expense of consumers,” a CCP official said.

In addition, from the competition perspective, the policy goals of consumer protection, technology upgradation and a culture of innovation goals could perhaps be better achieved by allowing imports of five-year-old cars, he said. However, the commission is also of the view that any short-term measures in the form of Custom General Orders (CGOs) and the Statutory Regulatory Orders (SROs) need to be avoided and a long-term policy should be preferred for the benefit of car dealers and consumers.

COMMERCE MINISTRY: The Commerce Ministry, which is supposed to look after the affairs related to imports and exports, initially opposed the initiative taken by the Ministry of Industries to reduce the age limit of importable cars. However, at later stages, the ministry kept mum over the issue and did not opt to challenge the initiative.

When this scribe visited the Commerce Ministry to document its perspective on the issue, almost all officers contacted in this regard refused to talk. “A powerful minister, who on the behest of local assemblers can get a summary approved from the ECC in few days, can get me transferred if I share any information with you,” said one senior official of the ministry in response to a query. Similarly, the public relations officer (PRO) of the ministry also refused to speak on the issue.

MINISTRY OF INDUSTRIES: The Ministry of Industries, which comes under Deputy Prime Minister Chaudhry Pervaiz Elahi who also holds the portfolio of a senior minister, moved the summary of reducing the age limit of used cars, and got it approved from the ECC. The ministry has been claiming that it had acted decisively in greater national interest, and that it was necessary for the local industry’s survival.

LOCAL VS IMPORTED CARS: The claim that used imported cars are affecting the local car industry does not stand up to facts. Figures show that local assemblers have been doing good business over the last three years until June 2012. Only in the third quarter of 2012, the sales have dropped. According to the people involved in the business, the main reason for lower sales in the last quarter of the ongoing year is the ban on CNG equipment, prominently in Suzuki Mehran. Furthermore, the sales of Suzuki Alto and Daihatsu Cuore have gone down because no new models have been introduced. Analysts say these are the main factors for the decrease in sales during the last four months.

MOTOR DEALERS: Being a major stakeholder in car business, the All Pakistan Motor Dealers’ Association (APMDA) has written a letter to the prime minister, seeking his attention on the issue. “This decision is a stab to the Pakistani consumers as well as overseas Pakistanis who send billions of dollars to their motherland in remittance,” the letter said. The APMDA further said that the decision had been taken only to satisfy the strong lobby of local car assemblers without taking the concerns of the used car dealers into account. The association requested the PM to term the ECC’s decision “null and void”. After the introduction of the new policy, used-car dealers have requested the chief justice of Pakistan to take suo motu notice of the issue.

NA body orders ministry to stay notification until surveys complete

Sensing something fishy in the decision, the National Assembly’s Standing Committee on Finance, Revenue and Economic Affairs on Tuesday directed the Commerce Ministry to not issue any notification until surveys were completed by the Competition Commission of Pakistan (CCP) and the National Tariff Commission (NTC) of Pakistan. The committee held its meeting at the Parliament House with Khawaja Sohail Mansoor in the chair. The committee members were of the view that some ambiguities had been found in the matter of imports of three-year-old cars in the country. Additional Commerce Secretary Fazal Abbas told the committee that the Ministry of Industries had contacted the Ministry of Commerce, showing its interest in reducing the age limit of used importable cars. However, Abbas added that after being contacted by the Ministry of Industries, the Commerce Ministry directed the CCP and the NTC to conduct studies to check the outcome of this proposal. “Surprisingly, the Ministry of Industries got the proposal approved from the ECC without waiting for the results of the studies being carried out by the CCP and NTC,” Abbas said. He added that the CCP and NTC were still working on the reports and their findings would be revealed soon. Upon this, committee member Abdul Rashid Gondal said the committee had observed something wrong in the policy passed by the ECC. After showing its serious reservations about the policy approved by the ECC, the committee directed the Ministry of Commerce not to issue the Statutory Regulatory Order (SRO) in this regard before the reports of the CCP and the NTC.

Pakistan Today | Dedicated to telling the news like it is

 

[airmarshal]

Pakistan is a big market. There must be new entrants. Just look at Pak Suzuki. Although there is a high demand for small engine cars, they are reluctant to introduce new models. They want to sell their Mehran based on 35 year old technology. Even when they were selling Alto, it also had a very old and extremely inefficient engine.

This must not go on. The quality of the local cars is not good but prices are as high as in the developed world. I m surprised to see a Civic in Pakistan costing more than it costs here in US or Canadian dollars!

 

[Bombaywalla]

This must not go on. The quality of the local cars is not good but prices are as high as in the developed world. I m surprised to see a Civic in Pakistan costing more than it costs here in US or Canadian dollars!

They cost more in your country than they do in the developed world. This is most unfortunate, and massively unfair to the people.

 

[Asian.Century]

Pakistan is a big market. There must be new entrants. Just look at Pak Suzuki. Although there is a high demand for small engine cars, they are reluctant to introduce new models. They want to sell their Mehran based on 35 year old technology. Even when they were selling Alto, it also had a very old and extremely inefficient engine.

This must not go on. The quality of the local cars is not good but prices are as high as in the developed world. I m surprised to see a Civic in Pakistan costing more than it costs here in US or Canadian dollars!

I agree, I am fed up seeing this old technology of Alto and Mehran of Suzuki. The government of Pakistan and the people of Pakistan must ACT.

And ACT quickly to end the pathetic monopoly of Honda, Suzuki and Toyota.

 

[airmarshal]

I agree, I am fed seeing this old technology of Alto, Mehrano of Suzuki. The government of Pakistan and the people of Pakistan must ACT. ACT quickly to end the pathetic monopoly of Honda, Suzuki and Toyota.

Just look around and see how small cars have evolved in the last three decades. Even Suzuki's own models are so much improved. Also look at Hyundai and Kia. Dont forget Fiat and Renault in all this mix.

We are still accepting a 1989 Mehran with 1982 engine. This joke must stop! And its not cheap. For a trash car like that, they demand more than $6,000!

 

[Asian.Century]

Just look around and see how small cars have evolved in the last three decades. Even Suzuki's own models are so much improved. Also look at Hyundai and Kia. Dont forget Fiat and Renault in all this mix.

We are still accepting a 1989 Mehran with 1982 engine. This joke must stop! And its not cheap. For a trash car like that, they demand more than $6,000!

Bro, it is not an easy task too. These three companies have very deep hands in Pakistan and Govt. They are very strong. Heck i agree they are selling overly priced 30 years old car technology in Pakistan.

These three big car companies have so much strong monopoly that any import of new entrants cannot survive easily. Stiff competition and conditions.

 

[Luftwaffe]

Pakistan is a big market. There must be new entrants. Just look at Pak Suzuki. Although there is a high demand for small engine cars, they are reluctant to introduce new models. They want to sell their Mehran based on 35 year old technology. Even when they were selling Alto, it also had a very old and extremely inefficient engine.

This must not go on. The quality of the local cars is not good but prices are as high as in the developed world. I m surprised to see a Civic in Pakistan costing more than it costs here in US or Canadian dollars!

You get a super duper honda civic 2014 for 23000 to 29000 dollars in CA/US in Pakistan you get it for the same bloody price for 2.3 million to 2.5 million rupees. Can you imagine i can get a 2008 family van for 6000 dollars and here in Pakistan you get a crappy 7,50,000 rupees alto/mehran. But we can't do anything these companies belong to rich in link with political monsters or directly investments are from political characters creating monopolies. Even iranian cars are miles ahead in design and comfort.

I've come to conclusion if someone has money just import a good brand from U.A.E and enjoy it even if you pay a little more atleast you know the vehicle would survive longer.

 

[CrazyPaki]

You get a super duper honda civic 2014 for 23000 to 29000 dollars in CA/US in Pakistan you get it for the same bloody price for 2.3 million to 2.5 million rupees. Can you imagine i can get a 2008 family van for 6000 dollars and here in Pakistan you get a crappy 7,50,000 rupees alto/mehran. But we can't do anything these companies belong to rich in link with political monsters or directly investments are from political characters creating monopolies. Even iranian cars are miles ahead in design and comfort.

I've come to conclusion if someone has money just import a good brand from U.A.E and enjoy it even if you pay a little more atleast you know the vehicle would survive longer.

We could always import used cars by different companies.

 

[AZADPAKISTAN2009]

Pakistan is a nation of 180 Million people , and the land mass is not that large.

So we can't have every body driving a car, so cheap cars are actually a negative thing

60% of Commute for Daily workers should be thru mass transit where Money is collected by Provinces via ticket sales

The cars should be for Upper class , or higher Middle class who can afford to buy insurance & licence renewals

The scooter's should also be banned cause of 90% of traffic accidents


80% of congestion in Pakistani streets can be cleared up by following meassures

a) Ban on Scooters , #1 cause of terrosim and shootings
b) Increase in average price of car with new engine technology to reduce fuel consumption
c) Mandatory rule , to force drivers of cars to buy "car insurance" from Banks
d) Improved Bus purchases / Metro Train introduction

 

[Asian.Century]

We could always import used cars by different companies.

Bro, importing cars / buses / trucks is so damn expensive....these monopolies have put so much custom duty and tax. Look at other countries they have ppl firendly laws on imports....this honda-toyotta-suzuki monoply has to be broken. It is bad for Pakistan !!!!

 

[Asian.Century]

Auto makers taking buyers for a ride

Aamir Shafaat Khan

KARACHI: Some hot selling locally assembled two and four wheelers cannot be searched on worldwide web for their counter price check as they exist only in Pakistan.

This is perhaps because of non-existence of any model phase out policy adopted by the car and bike assemblers and complete ignorance by the government.

Consumers have been buying more than two decades old models.

Many brand names still exist but their models, body shapes and engines have been completely changed decades back by manufacturers in Japan to beat competition, match technological leaps and meet emission standards.

Today people use internet to find the right price for the product they intend to purchase. In auto sector, internet search results for Honda CD 70cc bike, Honda CG-125 bike, Suzuki Mehran 800cc, Suzuki Cultus 1,000cc, Suzuki Bolan van, Suzuki Ravi pickup etc prove futile.

There is no Honda CD-70cc in the world as Pakistan is the sole assembler. India is producing over 100cc bikes of Euro III and Euro IV fuel efficient engines while in Pakistan the manufacture of Honda 70cc had introduced Euro II bike in 2012.

The price of CD 70cc produced by Atlas Honda Pakistan is about Rs70,000, while CG-125 sells at Rs102,500. Honda CD-70 model had inspired Chinese bike assemblers to introduce the same model at a price of Rs42,000-44,000.

It is not clear why the Japanese bike assembler chooses to keep redundant 70cc model in Pakistan or the formula used to determine its price.

The assembler claim to have achieved over 94 per cent indigenisation including engine parts in CD-70cc bike.

Same is the case with a particular model of Honda CG-125cc. By 2002, the deletion level reached 87 and 80pc in CD-70 and CG-125.

Honda CD-70cc bike has been in production since 1973. The company made overall change in model in 1993 and introduced its Euro II model in 2012. The local production of CG-125 got underway in 1981-1982 followed by a big engine change in same model in 1993 and then it was transformed into Euro II in 2012, an official of Atlas Honda told Dawn.

In over 20 years this bike should have been “Made in Pakistan bike” but this has not happened as its price is jacked up when yen gains value nullifying the claim of localisation. Atlas Honda produced overall 68,637 bikes in 1996-1997 and its production swelled to 639,066 units in 2013-14.

Honda Japan has given exclusive rights to Atlas Honda for manufacturing of CD-70cc and CG-125 in Pakistan and also for their exports to various countries like Sri Lanka, Bangladesh, Afghanistan etc, the official added.

He did not agree that the company had kept the model unchanged. The company now offers six models — two 70cc models, three 125cc models and one 100cc model as compared to only two models few years back.

He said there was no formula to phase out the model. “As long as there is demand we do not feel the need for change in the model,” he asserted.

A dealer at Akbar Road, the main market of motorcycles, said 70cc and 125cc bikes from China can be imported at $250 and $350, respectively. But they cost dearly here after paying duties and taxes.

In car sector, the production of India’s iconic Maruti Suzuki 800cc was suspended this year. More than two million Marutis had been sold in India since 1983. In Pakistan, however, Suzuki Mehran 800cc still rules the roads. With no major change in its exterior and interior, the company made some cosmetic changes.

Pak Suzuki Motor Company Limited (PSMCL) must have also recovered its investment but does not feel pressure to introduce new models.

Vendors of Mehran must be praised for making its parts for almost 25 years with same designs and specifications.

Two different models of Suzuki Mehran are sold at Rs625,000-678,000 but buyers cannot compare price as it is not in production outside Pakistan.

Suzuki Cultus is also over a decade old model that sells for Rs1,034,000 in Pakistan so there is no scope for price comparison.

Suzuki Bolan, priced at Rs695,000, was introduced in the 80s and has not changed since. Same is the case with Suzuki Ravi which costs Rs637,000.

Auto assemblers blame low production volumes for lack of investment in new models. What is the benchmark of volume that would make investment viable has not been mentioned.

Despite the fact that the local assembly of many models of cars and bikes started in the 1980s, the website of Pakistan Automotive Manufacturers (PAMA) provides archive data starting from 1995-1996.

Production of Suzuki Bolan was 3,200 units in 1995-1996 which swelled to 15,520 in 2006-07 and 17,250 in 2007-08 and then came down to 14,000 units in 2013-14.

Mehran’s production was 8,986 units in 1995-1996 which peaked to 36,988 in 2006-2006 and fell to 28,485 units in 2013-2014. Suzuki Khyber/Cultus production was 5,720 units in 1995-96 which hit to 29,880 in 2006-07 and dropped to 14,467 units in 2013-14.

Pak Suzuki remained a favourite of the Punjab government of getting order for taxi scheme that helped raised the company’s production.

Car assemblers enjoyed boom period (2006-08) due to over 70pc per cent sales of vehicles through bank and leasing finance which now has plunged to 15-20pc due to rising interest rates.

For some reason no government over the past three decades took assemblers to task for taking car/bike buyers for a ride. “How assemblers managed this? Your guess is as good as mine,” a market watcher commented.

“It is an open secret that auto makers do not provide fair value for the price they charge,” he added. It is the duty of the government to defend people’s interest and force special interest through greater competition to improve their products and keep price within fare range.

“In the UAE cars are tax-free, therefore they are cheaper. If you deduct taxes on an apple-to-apple basis, cars in Pakistan are cheaper than the UAE. Similarly in India and Thailand, a locally manufactured variant is more expensive as compared to those made in Pakistan, he claimed.

An official in Pak Suzuki admitted that Ravi, Bolan, Mehran and Cultus are not produced outside Pakistan and informed that the company has no plan to change models that sell well. “When sale is brisk there is no logic to replace or introduce costly versions.”

Another problem is low volume. In Pakistan the ratio is one car per 1,000 people. At this ratio no business will risk investing in new jigs, fixtures, tooling etc. Besides arrival of used cars haunts investors, he said.

For bringing the cost down, the company has asked the government to allow import of six items, by removing them from the negative list of items importable from India. It could facilitate low costs of CKD, introduction of new models, technology transfer/joint ventures in parts manufacturing and possibility for exports, he added.

Published in Dawn, November 9th, 2014

Auto makers taking buyers for a ride - Pakistan - DAWN.COM

 

[Aamna Ali]

The cheapest suzuki car : Suzuki Mehran costs PKR 6,50,000 in Pakistan which comes to ₹ 3,89,000 in India.. That model has been phased out since 2005 in India i think..The most basic version without even metallic paint.
In India this much money can buy you so many better,modern cars on India

1.Hyundai Eon Top Model
Features: Hyundai Eon 1.0 Kappa Magna + (O) - CarWale

2. Maruti Alto 800 Top Model
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3. Hyundai i10
Hyundai i10 | HYUNDAI MOTOR INDIA - NEW THINKING. NEW POSSIBILITIES.

 

[Aamna Ali]

4. Datsun Go
Datsun GO | Datsun India

5. Chevrolet Beat
Chevrolet Beat Diesel Petrol LPG Specifications, Chevrolet Beat Diesel LPG 1.2 LT LS PS Specifications

6. Nissan Micra Active
New Nissan Micra Active | Vehicle Range | Nissan India

7. TATA Indica eV2
Tata Indica ev2 (LS and LX) Features - Best in Class Comfort and Convenience

 

[Fracker]

Pakistan has to start manufacturing there own cars. Why the hell business men like mansha, hashwanies, etc can go and put a plant. Just imagne what impact this can have on economy, if imports of automobile can be tap in.

Its good for country as well, a very profitable business, whats wrong with us and our businessmen?