One of the largest integrated textiles mills in the country, Nishat Mills Limited (NML) announced that it will enter in to a Memorandum of Understanding (MoU) with Hyundai Motor Corporation (HMC), Korea and Sojitz Corporation, Japan to set up a green field plant for Hyundai to set up assembly plant in Pakistan.
The joint venture will produce HMC passenger cars and 1-ton range commercial vehicles in Pakistan, according to a notice sent to the Pakistan Stock Exchange (PSX).
However, the notice added, the project is subject to applicable statutory and regulatory approvals. NML share price closed at Rs169.52, up 2% on a day when the KSE-index declined by 110 points or 0.22% to close at 49,555.
After the announcement of the new auto policy in March 2016, a number of foreign automobile companies have announced to set up their plants in Pakistan.
Just two months ago, Lucky Cement, one of the largest cement makers in Pakistan, announced that it will set up a car plant in collaboration with Kia Motor Co with an investment of Rs12 billion.
Both leading Korean automobile companies, Hyundai and Kia, used to assemble cars in Pakistan but left the market mainly due to the liberal used car import policy in the Musharraf regime.
In November 2016, French carmaker Renault also agreed to invest in a new factory in Pakistan and the production phase is expected to start in 2018.
The re-entry of Korean brands is a big success of the PML-N government, which took over two years in announcing the new auto policy to give attractive incentives to new entrants and those who left Pakistan earlier. The government wants to encourage new players to invest in the local market, which is currently dominated by only three Japanese players.
Analysts say the trust in foreign companies on Pakistan is growing while the lucrative automobile market is attracting them to the country.
Pakistan’s car penetration of 13 vehicles per 1,000 persons is significantly lower than the regional average of 162, which shows there is a strong potential for automobile growth due to growing disposable income and low interest rate in the country.