Aiming for exports

LAHORE: Pakistan’s auto industry is now looking at the government to come up with a new auto policy, as the previous long-term document that had been in effect since 2016 has expired.

Auto policy 2016-21 gave consumers greater choice as new players challenged existing car assemblers.

The new policy should be announced after analysing the impact of the expired policy. A look at the 2016-21 policy shows that it was only partially successful as new entrants made their mark in the market.

The monopoly of three Japanese manufacturers was only partially dented. Moreover, European brands opted out after showing initial interest. French automaker Renault announced to pull off its investment due to economic uncertainties.

Ghandhara-Nissan which was bringing in the Datsun branded cars under the brownfield investment category, also announced to put the project on hold. Dewan, which was awarded brownfield investment and was working on to introduce SsangYong and Daehan branded vehicles, also stopped its activities last year.

Three new entrants have however shown their intent to play a long innings in Pakistan.

KIA-Lucky and Hyundai-Nishat motors have heavy weight sponsors and failure was not an option for them.

Hyundai-Nishat and KIA-Lucky stepped into launching their products nationwide, but they barely offered anything that targeted the market. Most of the options are horrendously priced, with little or no attraction even for those with deep pockets.

These expensive cars - mainly compact SUVs, have been mostly eating up the market share of the sedan segment.

Changan Automobiles was the first serious joint venture that materialised during 2016-21 auto policy, with a license from the principal to export Changan right hand cars globally.

It is also the only new entrant that has seriously challenged all the three old players. In 2018, Master Group of Industries entered into a joint venture with Changan motors as a hub for the manufacture of right hand Changan vehicles.

Changan has the largest car market share in China. It however does not produce a right hand variant. Former chairman, Pakistan Association of Auto Parts and Accessories Manufacturers, Nabeel Hashmi said that this joint venture has the potential to make Pakistan a car exporter in the international market, as Changan is a very reputable brand.

Engineering Development Board Chairman Almas Hyder said up till now the new entrants have restricted themselves to localisation of body parts, seats, upholstery, batteries and tyres. He said no serious efforts have been made to localise other more value-added auto components.

Changan Pakistan CEO Danial Malik said that localisation requires tooling by the vendors. They would go for tooling if they have confidence in the car manufacturers.

He said his company firmly believes that after the expiry of concessional imports of auto parts for new entrants, only those companies would reach the same localisation level as that of the older players.

With this in mind Changan Pakistan invited 50 leading auto-vendors for a meeting to discuss the ways to accelerate localisation of parts of all Changan variants. Malik said the response of the vendors was extremely positive.

On the basis of that assurance, he was sure that the localisation level of its Kaarvan MPV would increase from current 20 percent to 63 percent in 18 months, and M9 power carry also to 63 percent.

Malik claimed that Kaarvan despite being new already enjoys 57 percent share in the market against its competitive variant produced by Suzuki.

“Demand for Changan vehicles is on the rise, and the company is already operating on two shifts. Soon we will have to add the third shift,” he added.

He was highly optimistic about its sedan Alsvin that he claims is the only sedan in Pakistan based on Euro5 technology. “Features embedded in Changan sedans are much better than those available in Honda City and Toyota Yartis.”

He claimed that soon Changan Pakistan would be the 3rd or fourth largest producer of four wheelers in Pakistan.

“Changan Pakistan has worldwide rights to export Changan brand right hand vehicles. The company is working out rebate modalities with the regulators,” he added.

The CEO said universally and in Pakistan exports were zero-rated. However, he added Changan Pakistan was expecting some additional concessions for a few years to capture the export market.

He admitted that it would not be possible to export Changan vehicles to India because of political reasons. However, if India or any other country produces Changan brand right hand cars, it would have to pay royalty to Changan Pakistan.