Chinese auto makers: foray in Pakistan
Two Chinese auto companies — truck maker Sinotruck Limited and bus manufacturer Shanghai Sunlong — on 18th August, expressed interest in establishing assembling units in Pakistan.
The Chinese delegates were also told about the growing auto industry of Pakistan and China’s growing involvement in the production of motorcycles, cars, buses, and trucks, and also in the production of their auto parts.
On the occasion, it was disclosed that a possibility has emerged that latest Chinese buses fitted with Euro II-compliant engines would be used for plying on the Green Line and Orange Line routes – the first two sections of the Rapid Bus Transit Service (RBTS) being constructed in Karachi.
In the first phase, some 100 Sunlong buses would be imported in next six months to get them operational on mostly inter-city routes all over the country. Agreements have already been signed for purchase and operations of 32 such buses.
The Sindh government is required to spend Rs2 billion for procuring around 80 buses for the Green Line section of the BRTS while another 30 buses will also be procured for the Orange Line Bus Service.
The heavy commercial vehicle scenario in Pakistan has surely witnessed drastic changes in the last few years. As many Chinese and foreign brands have tested their luck in the hot-blooded Pakistani market.
The new players are already dominated by Hinopak Motors, Ghandara Nissan, Ghandara Industries and Master Motors which cumulatively enjoy sizable market share. It can be said that the new players have proven themselves to enjoy the profit fairly.The aim to cut a slice from the old players’ share seems a gigantic task but the price difference may lure the price conscious people associated with goods’ carrier business.
After experiencing the Japanese joint venture, a number of seasoned and organized players in the auto assembling business are now with ink agreements Dysin working with leading Chinese truck makers (Sinotruk truck) and Ghandara Industries is working with Dongfeng trucks .Volvo also plans to unveil high quality trucks in Pakistan. One of the leading Japanese companies along with one Swedish heavy vehicle player are collaborating with Chinese DongFeng which is the world’s largest producer of heavy duty trucks. These workings together direct us to a pretty well road which surely is bright for Pakistan.
The expansion of the premises of MAN Diesel and Turbo Pakistan is owing to the increase of capacities to realize the sizeable maintenance contracts the company has undertaken. Furthermore, the premises are extended and customized in such way that MAN Truck and Bus can start its business in Pakistan and develop its sales and after sales services for the region, showcasing trucks, buses and high speed engines in Lahore.
In December 2015, Karakoram Motors signed a contract assembly agreement with M/s Dysin Automobiles Limited for the assembly of their 220 and 290 hp Prime Movers SINO TRUCKS of China.
Some of the existing companies in Pakistan are Hinopak, Ghandara, Al-Haj Faw, Afzal Motors (Jac,King & Long van), PM Autos (Faw) Power brand light vehicle etc. Master Motors is a truck manufacturer based in Port Qasim, Karachi as a part of the Master Group of Industries.
The existing players had a nail biting experience from 2009-2010 onwards till 2012-2013. As per figures of Pakistan Automotive Manufacturers Association (PAMA), the overall sales of trucks plunged to 1,948 units in 2012-2013 from 2,394 units in 2011-2012, 2,942 units in 2010-2011 and 3,620 units in 2009-2010.
The China Pak Economic corridor is going to enhance the heavy duty truck and busses sale. This is because the latest highway is going increase the demand for travelling and people would want to travel in much more luxury and a comfortable manner. It is a great opportunity for Pakistan to attain utmost benefit out of CPEC.
Pakistan’s automotive industry 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. 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 one of the 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. 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. In response, Renault-Nissan, Kia Motors, Audi, Volkswagen and Hyundai have expressed interest in entering the Pakistani market.[ 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.
Market share
Hinopak remained the market leader with over 50 per cent market share. It sold 503 units in July-August as compared to 275 in the same period of last year, an increase of 82.9pc.
It was followed by Isuzu, which sold 368 units in July-August, up 164.7pc from 139 units sold in the same period a year ago.
Nissan truck sales rose 21.7pc year-on-year to 168 units while Master sold 149 trucks, up 14.6pc from 130 units sold in the same period a year ago.
Hinopak dominated the bus segment as well in the first two months of 2016-17. It sold 192 buses in July-August as opposed to 104 units in the same period a year ago, showing an annual rise of 84.6pc.
Bus sales by Isuzu increased to 18 units in July-August from 11 units a year ago while Master sold 17 units as opposed to just one unit in the preceding fiscal.
Policies of the government have played a major role in boosting sales of heavy vehicles. It is true especially in the backdrop of the new Auto Development Policy, where an age limit was imposed on the import of used commercial vehicles that created space for the local industry.
The rise in demand also absorbed the impact of the price increase on prime movers of 280HP and above. The government increased the duty on the import of completely knocked-down (CKD) kits for prime movers of more than 280HP from zero to 5pc in July. It had also decreased the duty to 5pc from 10pc on the import of prime movers of less than 280HP.
In the completely built-up (CBU) category, the import duty has been reduced to 20pc from 30pc on prime movers of less than 280HP.
The import duty was raised to 20pc from 15pc on prime movers of over 280HP. After the revision in the duty structure, some assemblers had increased/decreased the prices of heavy vehicles while others tried to maintain the price level.
Many importers have already approached the Ministry of Commerce and the prime minister’s office with false claims to get the age restrictions reversed. Duty- and tax-free imports of commercial and special-purpose vehicles for CPEC projects should be limited to only those categories of vehicles that are not manufactured in the country.