‘Better policies, greater choice, more business’

Indus Motor Company CEO Parvez Ghias talked to The News about the upcoming auto policy, the past policies, and the fall in local demand for automobiles since 2007. The industry provides two million jobs, impacting 10 million lives in Pakistan.
Q. What are your expectations from the upcoming auto policy?
A. We certainly hope the auto new policy is able to attract credible new manufacturers into the country so that customers enjoy a greater choice of vehicles. Equally, the policy must protect the existing OEMs and part suppliers who have invested heavily into localisation. Thus, creating jobs in thousands and enabling transfer of technology.
Furthermore, the government for its part should create the required infrastructure of testing facilities, schemes for technology acquisition, human skills development and limit the used car imports that severely damage the growth of the local industry.
Q. What has the local industry gained in the past seven years – since the 2008 auto policy granted it protection from imports?
A. It is important to clear this misconception about protection of the local industry from imports. New vehicles are freely importable into the country on payment of duty and the level of protection ie the difference between CBU and CKD rate of duty available in Pakistan is far below compared to any of the regional countries manufacturing automobiles. When the first auto policy was announced, the vision was to achieve 500,000 units in sales. In response, OEMS and part suppliers responded with major investments in capacity expansions to 275,000 units and new technologies creating several thousand new jobs in manufacturing and new dealership facilities across the country.
Ironically, global financial crises and several unfortunate national events soon after the launch of AIDP posed innumerable challenges for the industry and the government. The demand for automobiles that peaked at 250,000 units in 2006/07, crashed to 110,000 units two years later. It is yet to achieve the all time high volume. Both OEM and part supplier plants have surplus capacity and despite the above difficulties, the industry has continued to enhance its localisation, including addition of hi-tech parts which is a noteworthy accomplishment despite the strains of financial leverage and cost cuts.
Q. Do you think the rise in costs of auto finance has hampered the growth of the local industry?
A. Yes, the rise in interest rates and the non-availability of consumer finance has adversely affected the growth of the auto industry. Nearly two thirds of locally manufactured vehicles sold during 2006 - 2007 were made on auto finance. Now with the macroeconomic indicators stabilising and recent cut in interest rate by State Bank of Pakistan, lowest in the past 42 years, we hope that financial institutions will become proactive in offering auto financing facility to customers.
Q. In terms of expansion, job creation and introducing variety, have the local players done enough to justify the protection?
A. Vehicle manufacturing is a high profile industry that generates enormous revenues, employs millions of people and is often a proxy for a nation’s manufacturing prowess and economic influence. In India 10 percent of employed population is involved in automotive and allied industries, while in Thailand the auto industry contributes 12 percent of the GDP. Despite the roller coaster ride of our country’s economy, the auto industry has done well to provide about two million jobs, impacting livelihoods of nearly 10 million people.
Q. New entrants have been hard to come by and are unable to sustain themselves. As an established company, what tips would you have for entrants so they can establish a name for themselves?
A. Pakistan is a big market and new entrants will be attracted when we put our house in order. Most factors that apply to new investors entering Pakistan with a long term view, equally apply to the existing players in the auto sector who have to undertake major investment in retooling with the introduction of new model. Policy makers must capitalise at helping the industry realise its long term potential by creating an enabling environment of consistent policies and good governance.
Q. What are the future plans and what should we expect from the local auto industry in terms of performance and variants?
A. We are a market of nearly 200 million people which is an envy of many countries. There is no doubt as our per capita increases so will the demand for mobility. Given the right environment, the industry will continue to grow and offer choices of styles and technology.