May 8, 2013

New Auto Industry Development Policy

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Ministry of Industries started consulting stakeholders on Auto Industry Development Policy (2013-2018) about eight months ago. Several consultative meetings have been held where ideas were shared and debated to arrive at a consensus about policy initiatives meant to spur the auto industry into top gear. The purpose of these meetings is to take stock of the progress made so far (or lack thereof), and reiterate issues where candid discussions be undertaken one more time with the spirit of converging views of the stakeholders namely Original Equipment Manufacturers (OEMs), Auto Parts Manufacturers (APMs), and customers before the AIP is formulated. Earlier, its Auto Industry Development Plan (AIDP) 2007-12 was a failure. According to Secretary Industries Shafqat Naghmi “almost everything that the auto industry demanded was in it; everything that a government should promise an industry was in it and yet it failed because it was ambitious in targets, conservative in initiatives, and apologetic in implementation.” Ministry of Industries (MoI) has also analyzed the impact of five-year-old imported used cars and free trade with India. The Secretary Industries has correctly raised eight questions to the local auto industry which according to him need cogitated consensus. The questions are as follows; (i) where do we stand today and where do we see the auto industry in next 5 and 10 years? (ii) What is the level of appropriate tariff protection and for how long do we need to depend on protection? (iii) Why do we keep expressing our concerns about CBU or CKD imports more specifically from China or India? (iv) Is free trade with India a threat or opportunity? How can we thwart the threat or cash on the opportunity? (v) How real is the used cars import a factor for the local auto industry? Why should a new car manufacturer be worried about a used (five-year-old) imported car? Are we admitting low quality or higher cost and prices? (vi) Should indigenization be implemented as policy or should it be treated as an individual economic decision? Are there hidden motives for importing a part that is locally manufactured, especially if it meets the required quality and is cheaper than import? (vii) Why has A-max list still not updated? What are we trying to hide by not providing information about parts localised after 2004 and conduct a comparative analysis of cost of such localised parts with imported parts? And (viii) if volumes have been affected due to reduced domestic sales, what stops us from exports? We think these meetings require an attitudinal change, change on part of the government and adjustment in the thinking and expectations of the stakeholders. The underpinning of Auto Industry Plan (AIP) is “protection to the local auto and parts manufacturing industry”, which is a good thing if based on objective reality, rather than fear, which unfortunately was the case in respect of the AIDP (2007-12). An irrational sense of foreboding kept driving all the stakeholders to postpone implementation of reduced tariff rates agreed in AIDP and yet even with high tariffs in place, the targets of increased volumes and higher indigenization was not realized.

-Published on page# 8 April-2013 edition of MOBILE WORLD Magazine

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