Addressing the inaugural session of the Pakistan Auto Show 2015 organised by Pakistan Association of Automobile Parts and Accessories Manufacturers (PAAPAM), the Pakistan president advised the automotive industry to offer more choices and quality products to consumers at affordable prices.
Mamnoon Hussain said, “We cannot afford to ignore the fact that the automotive industry has emerged to be a role model of development and growth for other sectors. However, there is a need to see why consumers are resorting to imported used vehicles and why can’t local manufacturers give the consumers an affordable quality car.”
Referring to the case when manufacturers of locally-produced motorcycles were compelled to bring down their cost due to easy availability of low-cost Chinese bikes, the president said, “These are important questions which the industry should ponder over while moving forward.”
According to the State Bank of Pakistan (SBP), Pakistan imports 57 percent of its total auto-related raw materials from Japan, which implies that production cost largely depends on exchange rate which normally forms the basis of frequent increase in retail prices.
The Pakistan Auto Show 2015 kicked off on Friday 6th March amid much fanfare and coverage from the media. Besides throngs of exhibitors, foreign delegates and eager observers, the country’s President also graced the occasion.
Although President Mamnoon Hussein’s praise for the industry was the quotable quote for the events official press release, it was the back-handed compliments he dished out that warrant attention. In his speech, the President called on the automotive industry to pay more attention to the “most important stakeholder; the consumer”.
This is not the first time that the auto industry has been called out for stifling consumers interests in their quest for profitability. In October 2014, the Competition Commission of Pakistan (CCP) released findings of inquiry that found evidence that “collusion took place in four relevant markets”; namely the sale of new cars, sale of spare parts, body repairs and paint jobs as well as employment of experienced staff.
Economic think tanks and industry observers have often highlighted the lack of affordable choices for domestic car buyers. Sticky car prices despite significant declines in the value of the Japanese Yen allude to the auto makers’ position of strength as do the stellar profits raked in by PSMC, INDU and HCAR.
In their defense, the leading auto companies point out that they are operating at relatively low efficiency amid stifled demand for automobiles in the country. But critics cite the rampant collection of “own money” as contrarians evidence. Clearly, all but the auto industry members themselves believe much is amiss with the country’s auto landscape; at the expense of car buyers.
For its part, the government has indicated its intent to foster more competition domestically by granting incentives to new entrants in the domestic auto assembly industry. But even the formulation of the Auto Policy 2015 has so far been devoid of any meaningful input from consumers.
Sustainable Development Policy Institute (SDPI) is among other economic think tanks that want the new auto policy to be more “consumer sensitive”. What does that entail? Some of the most interesting suggestions include mandatory product recalls in case of faulty technology; accelerated localization coupled to bring down car prices; wider array of choices through drawdown on import duties and other barriers; stricter vigilance against deceptive marketing, etc. Despite the criticisms, it would be foolish to deny the economic impact of domestic auto sector whether in terms of employment generation, GDP contribution and exports, albeit to a limited extent. However, the guiding principle in formulating this and other policies must be to maximize consumer surplus while inculcating a vibrant and sustainable industry in the country. Protectionism and handouts will not do that.
Yes, an exportable surplus from the auto industry is welcome and any significant growth in its sales overseas from the current level would be a boon to the economy. But the auto assemblers, parts manufacturers and associated firms cannot be appeased at the expense of the people. The new auto policy must put the industry on the road to progress. But it must do so with consumers in the driving seat.
The government wants to increase automobile manufacturing in the country and, at the same time, protect the interests of consumers in the upcoming auto policy, said Commerce Minister Khurram Dastgir Khan.
During his visit to Pakistan Auto Parts Show (PAPS) at Karachi Expo Centre, he said the new policy will balance both car imports and manufacturing in the country. “Prime Minister Nawaz Sharif supports the efforts the local auto industry is putting in these exhibitions to show what we are producing for locally assembled automobiles,” he said.
The office bearers of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) stressed on the new auto policy to support localisation. “The more Pakistan moves towards localisation, the more it can reduce car prices,” Paapam Chairman Mohammad Siddique Misri said. “This is how the new companies can be encouraged to enter into Pakistani market to compete with existing players.”
There were seven carmakers in Pakistan in 2007, but four of them left the country because of the liberal car import policies of the government, said the office bearers of Paapam. They further added that low consumer financing in Pakistan is also hindering the growth of the auto sector. “Usually 70% of the car consumers get financing in different countries but this ratio is opposite in Pakistan; here only 30% are able to get financing from banks.”
PAPS is a premier industry event which is held every year, once in Karachi and the other in Lahore. The exhibition brings together automakers and auto parts manufacturers to display local products.
Two of the most prominent features of the recently concluded Pakistan Auto Parts Show (PAPS) were a tracker device for two- and three-wheelers, and hybrid rickshaws.
Arshad Ghaffar, the CEO of Moto Track Private Ltd which introduced the country’s first tracker for motorcycles and rickshaws, told that the price of imported tracker device is Rs3,450 and service charges are Rs1,500 per year. “It would be affordable for both lower- and middle-class customers. We are in talks with two leading bike assemblers for installation of our device. We aim to tackle the rising theft of motorcycles in Pakistan.”
He urged the government to pass a law that every motorcycle to be sold in 2015 must have a tracker installed before registration.
Naveed Iqbal, a senior manager of the company, said the unit is waterproof, constantly connected via GPRS and can run for eight hours at its own battery. “Each motorcycle outfitted with our tracker will also contain a hidden easily accessible panic button located at the throttle, which will send SOS signals with locations to police headquarters in case of an emergency,” he said.
“SOS signals and theft will appear as a red dot and can be dealt with appropriately by the officers in the area,” he added.
The Hybrid rickshaw, priced at Rs300,000, can be fully charged through a normal electric socket in seven hours, said Muhammad Ayaz, the director of Green Wheels Private Ltd. However, the rickshaw can charge the batteries from its own alternator generator much faster while running on petrol engine. Once fully charged, the vehicle can travel 40 to 50km and can reach speed of up to 50km per hour.
Currently, these rickshaws are being imported from China. However, Ayaz said, “If the product works out, the company would think about its assembly and transfer of hybrid technology to Pakistan.”
The company also has the solutions to convert a normal rickshaw into a hybrid one by installing special conversion kit from GW Hybrid, he said. He requested the federal and provincial governments to support this new hybrid technology “for the benefit of the common people. We also plan to launch hybrid bikes and small low-prized hybrid cars in the near future,” he added.
-Published on pages# 19-20-21 March-2015 edition of MOBILE WORLD Magazine