LAHORE - The Pakistan auto sector suffered serious damage in 2005 when the government opened the doors for import of used cars by allowing blatant misuse of concessionary schemes solely meant for overseas Pakistanis.
After deregulation in 1980, the industry witnessed a long period of revival, expanding annual production capacity to 273,000 vehicles at eight assembly plants. However, the domestic production of automobiles declined by 30% after used cars import since 2005 while five assembly plants were also shut down during this period. Moreover, the global brands shown lack of interest to invest in a country which prefers to import rather than manufacture automobiles.
Auto industry representatives have expressed dismay that 40 per cent of the installed capacity in the country is lying idle at the moment, causing huge job losses to the sector. It is to be noted that due to high level of unemployment in the country, one employed person is supporting up to 6 family members. The only way to solve the social problems of the country is to create employment opportunities for workers, technicians, engineers & management professionals through aggressive support for manufacturing automobiles and auto parts in the country. This has been the route followed by various countries such as China, India, Indonesia, Thailand, Malaysia and Brazil etc.
The auto parts manufacturers are playing a commendable role by producing high quality components, which are being used in latest vehicles being assembled in the country such as Honda Civic, Toyota Corolla, Honda City, Suzuki Swift & Suzuki Wagoner. Also, cost effective parts are being produced for entry level models, such as Mehran, Ravi & Bolan, which have all been modified recently, to fully comply with Euro 2 regulations implemented by the government.
PAAPAM Chairman Siddique Misri claimed that most of the cars models produced in Pakistan are lower in cost as compared to other countries. This cost reduction has been possible despite very small car market volumes in the country. For this achievement, full credit must be given to auto parts manufacturers for assuring localization at economical prices.
PAAPAM senior vice chairman Mumshad Ali said that the rise in cars prices during last seven years has been due to increase in various input costs (as well as rupee erosion) but the increase has been far lower as compared to the multifold increase in prices of other commodities and manufactured goods during the same period.
Mumshad observed that most of the domestically produced models are available within a reasonable delivery lead time of 4-6 weeks. The premiums, if any, are being charged by scrupulous middlemen and investors, who hoard and create artificial shortage of a given model to make illegal profits. PAAPAM demanded the government to make laws to discourage and punish such forces which create distortion in the market.
PAAPAM SVC demanded that the government should create a level playing field by withdrawing duty concessions on used car imports, so that there is fair competition with the locally produced vehicles. The auto industry representatives strongly criticized the recent letter written to the Finance Minister by the self appointed All Pakistan Motor Dealers Association for misleading the government on various issues pertaining to the automobile industry. They said that the APMDA letter is full of factual errors.