Higher localisation tied to half a million car sales a year

November 28, 2021

KARACHI: Rate of localisation will witness a significant increase after auto sector sales have reached 500,000 cars annually, an industry official said on Saturday.“With more than 60 percent...

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KARACHI: Rate of localisation will witness a significant increase after auto sector sales have reached 500,000 cars annually, an industry official said on Saturday.

“With more than 60 percent localisation, IMC (Indus Motor Company) is currently procuring local parts worth over Rs200 million every day from its vendors,” said Ali Asghar Jamali, CEO IMC, while talking to journalists.

“It is economies of scale that make a business case for further localisation in the industry, while a government’s long-term policies also pave the way for more investment in a country.”

Jamali said consistent macroeconomic policies in Pakistan were crucial for progress of the country’s auto industry.

“Give policies for 20 and 30 years and see investment flowing in the country in abundance,” he said.

The auto industry in Pakistan is criticised for increasing car prices whenever rupee depreciates and experts say dependence on imported parts and raw material is the reason behind this. Since January 2018, car prices have gone up between 27 percent and 68 percent, coinciding with the period when the rupee had started to depreciate significantly.

IMC CEO said they were working on numerous upgrades and new models in coming future with a key focus on localisation.

“With 36 technical assistance agreements in Pakistan, we have laid the foundation of automobile technology transfer in Pakistan and exponentially contributed to it. This has not only generated employment but also opened doors to export for many local part makers,” Jamali said.

Emphasising that more investment would help increase localisation as well as jobs in the sector, he said the industry had invested heavily in the last four decades to establish a local engineering base.

Jamali pointed out the parts manufactured by local vendors were made of imported raw materials. “We [Pakistan] don’t have industries [such as auto grade steel manufacturers and plastic raisins] that can produce raw material for the auto industry.”

He acknowledged localisation had increased with the passage of time due to government and the local auto manufacturers’ interest.

“Higher volumes result in higher localisation levels and vice versa.”

He claimed Original Equipment Manufacturers' (OEM) initiatives in localising parts of their vehicles had helped local vendors significantly over the years.

“Local vendors and OEMs are working in collaboration for localisation,” said Jamali, adding, “Recently IMC has announced an investment of $100 million for localised manufacturing of hybrid vehicles”.

“This huge investment is sure to give a boost to local auto vendor industry, while opening doors for new hybrid technology.”

The investment would go towards localisation of components, plant expansion, and production preparation for the first hybrid electric vehicle to be manufactured at IMC plant, he added.

Jamali said IMC had also made an additional investment of $30 million in its plant in order to meet demand in the post-Covid era.

The total industry-wide installed capacity, he explained, had touched 420,000 units annually and was expected to increase in the foreseeable future with further investments across the industry.

On hybrids, he said it was a practical as well as a sustainable new option for local customers to enjoy better mileage on top of helping curb oil import bill.

“While facilitating customers through 50 percent to 70 percent fuel savings, hybrids will also help generate jobs through localisation.”

Jamali said in the aftermath of Covid pandemic, revival of domestic travelling led to a rise in demand for cars.

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