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Trade deficit turns out to be blessing for local car assemblers

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Trade deficit turns out to be blessing for local car assemblers
By Farhan Zaheer
Published: October 27, 2017
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Cars are assembled at a plant. PHOTO: REUTERS

KARACHI: It seems as if the government has paid full heed to decade-old demands of the existing car assemblers in the country.

As the dust settled on the issue of regulatory duty on new and used car imports, industry stakeholders realised they were in for a bigger shock than what they had earlier imagined.

According to latest details, regulatory duty has not just been enhanced on used vehicles over 1,800cc, but across all engine categories – on new and used vehicles – by 15%, effectively making all foreign cars expensive.

The import of used cars has come to a complete halt after the recent changes. While the changes were made due to the increasing trade deficit, it has, ironically, given a major boost to the local industry that has long been criticised for being a cartel that hinders entrants and disrupts free market competition.

Auto sales jump to 20,720 units, up 21.5%

Also, according to the new rules, owners of all new and used vehicles will now need to pay duties and taxes themselves or by local recipients supported by a bank encashment certificate showing conversion of foreign remittances to the local currency.

“The government cannot afford to kill this industry as it generates Rs70-80 billion in revenues annually,” All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad said. “We have been following these same procedures for over 50 years and the government knows it well.”

Car importers have been importing used vehicles through three major schemes; personal baggage, transfer of residence, and gift scheme for decades.

But changing dynamics of the economy, which have seen the country’s foreign exchange reserves decline drastically, have meant that the government has been forced to take action.

On Thursday, APDMA wrote a letter to Prime Minister Shahid Khaqan Abbasi urging him to intervene and save the industry from collapse.

Shahzad, who represents the powerful lobby, is confident that he would succeed in taking time from top government officials in Islamabad on Monday or Tuesday.

According to rough estimates, Pakistan does not even import 1,500 brand new vehicles a year. However, the country imported about 65,000 used cars in fiscal year 2017 compared to about 56,000 units in the previous year.

Local car assemblers and money changers have long been blaming used car importers for hurting the national economy as they take out dollars from the local market through illegal means.

Pakistan looks at inflow of $2b as four auto companies get permission

Recently, leading money changers have urged the government to restrict the ballooning used car imports if it wants to maintain the rupee-dollar parity in the open market. Due to political uncertainty in recent months, the State Bank of Pakistan (SBP) has been trying to control the value of dollar in the open market.

Pakistan imports $300-$500 million worth of used car annually, according to a recent report of Topline Securities. However, according to the calculations of local car industry officials, Pakistan is spending close to $750 million a year on used car imports.

Published in The Express Tribune, October 27th, 2017.

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Read more: auto industry , cars , Latest
 
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Many people are not going to like this but the local industry has to be protected along with our little foreign reserves.

Our large scale manufacturing is already in decline and stress since the days of Bhutto's nationalisation disaster. At least we can save the small amount of manufacturing that has managed to survive, even at the cost of consumers.

Cars are not essential items anyways; those who want to buy them, should not whine about the prices. It's a luxury item, not your daily groceries without which one cannot survive.
 
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Do not know, seems Pak car industry is what India had in 1980s. It was gradual investment as well as supporting policy which converted India into major car exporter. Key is sustainable policy.
 
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Auto sales jump to 20,720 units, up 21.5%

21.5% how much is local and imported (see figures bellow) cars?

Pakistan imports $300-$500 million worth of used car annually, according to a recent report of Topline Securities.

Allowing unprovoked import of used cars was a nonsense excuse that it would put pressure on local assemblers by policy makers to get commission from importers. India achieved the localization of cars decades ago with keeping the ban on imported cars. As supply of cars is already to much saturated and this will cause drop in demand in near future due to these imported dumped cars this going to be a serious challenges for new car manufacturers entering the Pakistani market. The same cartel controlling the imported cars is one way or the other delaying the setup of new entrant in the auto manufacturer market so that they had the least share. The same mafia will acquire these failed plants of forgien car manufacturers (particularly EU ones, do keep EU investors away from Pakistan)and the same mafia is after public institutions (PIA, PSM...) to be privatized so that they can acquire them for 'pennies' after making them planned failure.
 
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Do not know, seems Pak car industry is what India had in 1980s. It was gradual investment as well as supporting policy which converted India into major car exporter. Key is sustainable policy.
Automotive industry in Pakistan
From Wikipedia, the free encyclopedia


The Pak Suzuki Mehran is Pakistan's most produced car.
The automotive industry in Pakistan (Urdu: پاکستان کی گاڑی صنعت‎‎) is the one of the fastest growing industries of the country, accounting for 4% of Pakistan's GDP and employing a workforce of over 1,800,000 people.[1] Currently there are 3200 automotive manufacturing plants in the country, with an investment of ₨92 billion (US$870 million) producing 1.8 million motorcycles and 200,000 vehicles annually. Its contribution to the national exchequer is nearly ₨50 billion (US$470 million). The sector, as a whole, provides employment to 3.5 million people and plays a pivotal role in promoting the growth of the vendor industry. Pakistan’s auto market is considered among the smallest, but fastest growing in South Asia. Over 180,000 cars were sold in the fiscal year 2014-15, rising to 206,777 units fiscal year 2015-16.[2][3][4] At present, the auto market is dominated by Honda, Toyota and Suzuki. However on 19 March 2016, Pakistan passed the "Auto Policy 2016-21", which offers tax incentives to new automakers to establish manufacturing plants in the country.[5][6] In response, Renault-Nissan, Kia Motors, Audi, Volkswagen[7]and Hyundai[8] have expressed interest in entering the Pakistani market.[2][9] Pakistan has not enforced any automotive safety standards or model upgrade policies. Obsolete vehicles including the Mehran, Bolan, and Ravi continue to be sold by Pak Suzuki.[10]
History:
1950s
Pakistan produced its first vehicle in 1953 at the National Motors plant in Karachi, according to the Ministry of Industries & Production. The plant was opened in conjunction with General Motors who arranged the facilities for the production of Vauxhall cars and Bedford trucks. Subsequently, buses, light trucks and cars would be assembled at the same plant. In the same year, Ford trucks partnered with Ali Automobiles where they introduced Ford Anglia, Ford pickups and the Ford Kombi. Exide Pakistan also began production of car batteries in 1953. Haroon Industries partnered with Dodge Motors in 1956.

1960s
In 1961, Allwin Engineering introduced precision auto parts to the Pakistani auto market. In 1962, Lambretta partnered with Wazir Ali Engineering to begin production of the Lambretta TV200 scooter while Kandawala Industries introduced Jeep CJ 5, CJ 6, CJ 7. In 1963, General Tyre Pakistan began production in Karachi while Hye Sons began production of Mack Trucks. In 1964, Rana Tractors began producing Massey Ferguson Tractors while the famous Vespa scooter and rickshaw were introduced by Raja Auto Cars. In 1965, Jaffer Industries and Mannoo Motors began operations.

1970s
The 1970s saw nationalization of many companies. In 1972, the Pakistan Automobile Corporation or PACO was formed. Many companies were bought out or merged into others. Wazir Ali Engineering was renamed to Sindh Engineering, Ali Autos to Awami Autos, Haroon Industries to Republic Motors, Ghandara Motors to National Motors, Hye Sons to Mack Trucks, Kandawala Industries to Naya Daur Motors, Jaffer Industries to Trailer Development Corporation and Rana Tractor to Millat Tractors. Dawood Yamaha introduced Yamaha motorcycles in 1974 and in the same year Beta Engineeringstarted producing diesel engines. In 1976, Suzuki Motor Cycles launched by Sindh Engineering. Saif Nadeem Kawasaki launched Kawasaki motorcycles in 1977 while Suzuki Jeep was manufactured by Naya Daur Motors.

1980s
In 1980, Awami Motors began manufactured Suzuki pickups while Sindh Engineering began producing Mazda Trucks. In 1981, Agriauto Industries introduced production of local auto parts while in 1982, Suzuki began production of vehicles. In 1983, the Vendor Development & Technical Cell or VDTC was formed along with Al-Ghazi Tractors which was introduced by Fiat. In 1986, Hinopak Motors began as a joint venture between PACO, Al-Futtaim, Hino Motors & TTC. In 1987, Ghandara Nissan began production of Nissan Diesel Trucks. In 1989, Pakistan Association of Auto Parts & Accessories Manufacturers began operation.

1990s
The industry was highly regulated until the early 1990s. Following deregulation, the decade witnessed a huge boom in auto production, as nationalization was abandoned in favor of privatization. Japan acquired the 40% shares of Pak Suzuki in 1991. In 1993, the Indus Motor Company began production of Toyota Corollas. In 1994, the Pakistan Automotive Manufacturer Association formed, and Honda Atlasintroduced manufacturing of the Honda Civic. In 1995, the Engineering Development Board inaugurated the PAP show.

2000s
From 2001 -02, some Pakistani importers started import of Chinese CBU bikes in Karachi, due to custom duty cut by Finance minister Shaukat Aziz after 2 decades and Chinese firms also made copy of small Japanese bikes especially famous of HONDA CD70, in the Same period 5 Karachi based units start local assembling of CD70 Replica these were GUANGTA SITARA, ROCKET, JINAN, SUPER STAR, & STAR. From 2002 to 2007, auto sales reached record sales year after year, reaching a peak of 195,688 sales in 2007, thanks to rising car financing up to 70-80% by banks and low interest rates coupled with rising rural purchases. From 2007 to 2009, the auto sector witnessed reduce sales amid high interest rates and Yen appreciation against the Rupee. In 2007, the automotive industry made up 2.8% of Pakistan's GDP and contributed 16% to the manufacturing sector. The 2000s also saw the introduction of dual fuel options to run both on Petrol and CNG, which is more affordable and cheaper than petrol in the country.

2010-present
From 2010, many small auto units of bikes closed due to stiff competition between the Assemblers but still some Assemblers applied for the approvel to start assembly, Currently 3 Japanese, and 7 Chinese Assemblers are making profits 40 + units are not in good position. In 2010 the sales rebounded and began increasing again. The auto industry predicted a growing demand in Pakistan and invested over Rs20 billion during this decade. Motorcycle production hit a record level of over 1.5 million units in 2010-2011. In 2015, the Auto Policy 2016-21 was introduced, to help introduce new entrants into the Pakistan auto industry, which has traditionally been dominated by Honda, Toyota and Suzuki. The auto industry remains the second largest payer of indirect taxes after the petroleum industry in Pakistan. At present, there are 10 cars for every 1000 people in Pakistan. This is one of the lowest ratios among emerging economies, which itself speaks of high potential of growth. Rising per capita income with changing demographic distribution and an anticipated influx of 30 to 40 million young people in the economically active workforce in the next decade will provide a stimulus to the industry to expand and grow [12]

Historical production by year[edit]
Automobiles[edit]
Historical production by year (Automobiles)[13]
Year Production
1992

66,000
1993
76,000
1994
61,000
1995
44,000
1996
78,419
1997
41,585
1998
43,519
1999
46,761
2000
39,117
2001
46,538
2002
48,579
2003
74,274
2004
112,550
2005
150,016
2006
189,639
2007
195,688
2008
186,064
2009
100,468
2010
137,415
2011
153,114
2012
175,184
2013
134,849
2014
148,746
2015
229,686
2016
274,536
Motorcycles
Historical production by year[14]
Year Production
1996

106,797
1997
92,978
1998
87,504
1999
86,959
2000
108,850
2001
120,627
2002
175,169
2003
303,383
2004
416,189
2005
520,124
2006
467,267
2007
660,593
2008
509,054
2009
736,861
2010
838,665
2011
828,576
2012
819,556
2013
771,507
2014
1,131,196
2015
1,362,096
2016
1,632,965
Manufacturers[edit]

 
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Had it not been for corruption, Pakistan gov should have done a joint venture with one of the car good car manufacturers to build cars locally and develop that into a local brand. Malaysia did that by forming Proton with Mitsubishi and that worked out very well. Eventually Mitsubishi stepped out (as per agreement) and Proton became malaysia's local car manufacturer with the technology in hand too.

Chinese took the short cut, they just bought the tech straight out, because they could afford to.
 
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