Pakistan automobile industry has immense potentials and capabilities to shift the economy wheel and grow the industry as necessary measures are taken by the government.
Pakistan automobile industry produces/assembles cars ranging from 800cc to 1600cc including buses, trucks, pickups, jeeps, minibuses, motorbikes and tractors. But there isn’t a 100% Pakistani made car.
As the economy rises out of recession, there would be an increase in demand leading to better expansion prospects for auto industry. The deletion policy ensures that most of the parts are made locally and not imported; hence this would increase manufacturing vendors (OEM’s) demand. A strict policy to curtail and limit foreign exchange will also increase demand for locally manufactured and assembled cars.
There is a need of long term steady policy for the Pakistani Auto Industry. The policy should be based on restraining imports of used cars to avoid damaging of local industry and closing of the manufacturing plants. Moreover, new tariff system could be introduced under which imports of auto parts that could be manufactured in Pakistan are imposed higher tariff to make their imports unviable. Emphasis should be on future investments from foreign countries as well as technology transfer.
Pakistan auto industry could grow in terms of LCVs sector and HCV by government’s investment in infrastructure development projects. The roads, highways, ports shipping needs to be addressed by providing easy geographical location/access for the supply of cars.
There is a linkage of growth of auto components and assembly sector. To be able to achieve the mass production in the next five years, the auto component production would tend to become more competitive and technologically more advanced to contribute to the global supply chain.
Similarly government must focus on its commitment to consistent policy by concerning shareholders’ decision, a proper execution and review of policies would help get more investment, increased production, innovation and improvement and growth sustainability.
The auto industry has the opportunity to increase its export potential of its diversified product range of 2 wheelers, tractors, fuel efficient cars and auto components. The industry needs to meet the local demand by expanding into export market.
Export of auto products is highly significant for the expansion of auto industry’s market and off course gross profits. At present the Govt. is providing 25% subsidy to new products in order to promote export and AIDP has laid a target of export of US $ 650 million by the year 2011-2012.
In order to get a prominent automotive industry in the world, it has to start manufacturing the valued cars as the initiative was already been made by the ADAM motors., but due to the less sales cheap plastic interior and hideous looks it turned out to be failed and people were preferring a used car than REVO.
Expansion could be made if the industry starts manufacturing the essential parts under the technical assistance that could help in manufacturing the cars of valued quality.
Challenges and barriers to expansion Auto industry has to overcome the challenge of low cost production and obtaining economies of scale, growth of skilled human resource, generating local demand, R&D and utilizing worldwide business opportunities. If the industry conquers the above barriers, it would be able to reach the mass production level, high and improved quality products by acquiring suitable technologies, safety standards and regulations, and environment friendly cars.
The challenge is the government’s role in establishing and maintaining, implementing, and reviewing a stable policy. Moreover, there has to be developed infrastructure, along with strict traffic rules, trained drivers, effectual vehicle registration, amendments in the motor vehicle act, and required insurance would contribute to sustainable expansion of auto industry.
A problem is that the manufacturing sector of the auto industry does not have a larger share compared to other countries to its GDP. The goals therefore, should be to create more jobs, export, conduct research and development, and bring in innovations and appropriate technologies to the sector to endorse the manufacturing division.
Other barriers include multiple taxes, increased import prices of goods. Manufacturers have to face under invoice and smuggled components. Used components imports are still at large. Also there is a burden of excise duty and suppliers paying technical fee acts as a key barrier in innovation. High cost of capital, required human resource, funds available for technology, inaccessibility for enterprises and insufficient incentives in the financial policy also restrict auto industry to develop. Furthermore, the sector prevents it self from value addition due to high tech machines and tools used from developed countries. Interest rates tend to rise as unpredictable demand is not met for auto products. Lastly, there is an increased demand of energy associated with higher costs and insufficient supply causing wastages in the manufacturing sector.
To overcome the above barriers government and the industry would need to work together to improve competitiveness and expansion by focusing on investments, human resource, technology, fruitful resources and supply chain management. The industry should create a benchmark of performance in comparison to world tasks by adopting and employing best practices for manufacturing and production processes and be able to produce globally acknowledged products.
Government should provide incentives for international companies to invest in Pakistan and convince them to establish there manufacturing power plant in the country such as Ford Motors, GM, Hyundai, KIA, Mitsubishi. By establishing these power plants in Pakistan, it will provide employments to people and will help in contributing to the GDP of the country.Government should provide all the facilities to the foreign companies like electricity, safe environment, better living facilities use of technology etc. Car manufacturer should try to introduce such measures which reduce the fuel consumption such as Built in CNG kit in petrol cars as CNG in Pakistan is relatively cheaper then petrol. Local manufactures could be encouraged to design two and three wheelers wholly in Pakistan. Lastly, government should embrace policy making environment by consulting with the industry it self in formulation, implementation and evaluation process.
Pakistan Automotive Manufacturers Association (PAMA) should take measure and steps for the progressive manufacturing of vehicles in the country. They should encourage the investors and should give loans on easy terms which enhance the manufacturing in our country.
To expand the sales market in Pakistan it depends on the car dealers or showrooms and to introduce such offers which attracts the customers and convince them to buy their cars such as:
1) Bank financing
2) Unlimited service warranty (100000 km)
3) Easy installments
4) No down payment
5) Road side assistance
6) Competitive sale price
One of the major step which government should take is to privatize the car registration process. Due to which all the old cars will be banned from use. Proper yearly check of the cars will be done at the time of registration which will increase the sale of new cars in the country and hence improve the environment as there will be low emission of carbon dioxide.
Pakistan can also expand the automobile industry by utilizing the solar energy, like if the cng and petrol are turning to be costly, they may replace with solar energy. This helps in providing employment to a number of people. A proper battery charged by the solar energy can be used in the car.
Expansion could be done by introducing the Barter Trade system with the neighboring countries as Pakistan manufactures tyres and other car accessories and they could exchange it. This way imports could be lowered down and would not affect our local auto industry.
If we look at each industry player and their market expansion possibilities, we would sum up by saying that auto manufacturing companies should expand the production capacity as the demand as increased of assembled cars. However, there has to be other strategies to be adopted to grow and contribute into the expansion of the industry as a whole.
Pak Suzuki Motors could use product development strategy by focusing on providing the highest performance level in its production in terms of functionality and features. The company would require an in-depth research to involve latest technology and innovative products.
It must also focus on its competition Toyota. Pak Suzuki should expand its market and enter into 1600cc and 1800cc to increase its market share.
Pak Suzuki Motors (PSMC) has gained competitive advantage of its local assembling and production of cars. It has the opportunity to manufacture cheaper cars. PSMC cars are said to have cars for lower and middle wage earners for the people. They must also compete with Honda and Toyota by producing cheaper and technologically efficient products.
PSMC should augment its distribution to overcome the threat of used imported cars. It should develop efficient engines and CNG systems to eradicate the risk of increased fuel prices. It could also revise its design and structure of its cars to be innovative and competitive. Furthermore, the company should fund and develop mechanical institutes to get hold of skilled workers. It should make consistent commitment to quality and maintain affordable prices as well.