In its half yearly report submitted to Pakistan Stock Exchange (PSX), Pakistan Suzuki Motor Company (PSMC) informed that its sales recorded a decline of eleven percent in January-June 2019 to the corresponding period of last year. Rest of auto assemblers such as HONDA, TOYOTA have reported similar trend. Increased cost of vehicles has been cited as a major factor in auto sales drop. While numerous factors have been cited contributing to increased costs, rupee devaluation-thus affecting cost of imported materials, parts and products, has been singled out as a major factor. Auto industry has warned that if present trend continues, it would affect jobs in the auto sector. The consumers have seen this roulette of rupee depreciation and auto prices increase by auto assemblers ever since they were allowed to establish their plants in Pakistan since 1980s.
Local technological indiginisation plays an important role in offsetting effects of monetary depreciation on auto prices. Thus, the aforementioned scenario warrants few questions. First, what is the present level of technological indiginisation existing in major auto assemblers such as Toyota, Honda and Suzuki, which have been operating in Pakistan since 1980s? What was the technological indiginisation roadmap agreed with auto assemblers at the time of granting assemblers permits, tax breaks and waivers? Apparently, at present, any level of monetary depreciation affects auto prices. Aforementioned questions also hold true for new auto entrants as well. They should be asked to put forward local indiginisation roadmap, and milestones may be setup to measure indiginisation efforts achieved.
Second question is lack of information provision on part of auto assemblers as how much they have integrated local suppliers in their value chain? What is the technological level of integration of suppliers? And how much they (auto assemblers) have supported local suppliers in achieving indiginisation of parts and products?
Third question is upon the capability of auto assemblers in Pakistan to tap foreign markets. In their statistics, auto assemblers fail to mention any foreign market sales. Local indiginisation and quality control are among major factors which affect the capacity to develop export capability. Fourth question relates to product portfolio expansion of auto assemblers i.e. if they have moved beyond assembling cars to trucks, which our economy now needs to support new projects such as CPEC.
Presently, Pakistan is a consumer oriented economy and should move to a manufacturing economy-to create jobs for an ever burgeoning population, for which it is imperative that technological value addition, indiginisation, quality control and increased product portfolio may be made priority in our auto policy. Accordingly, with aforementioned ingredients, our auto industry could increase local sales and tap foreign markets which would help our auto industry cushion against market volatilities and facilitate local job market and consumers.
