The Automobile industry of Pakistan has tied its hopes with the Prime Minister Nawaz Sharif, who wishes to see a ‘Made in Pakistan’ car. Though the government’s policy related to auto industry is not yet disclosed, many industry specialists still believe that certain incentives can be anticipated.
Pakistan Auto Show 2014 in Lahore was able to attain the heed of Prime Minister (PM) who inaugurated the show. Despite having PM in the seminar, no solid ground could be achieved with regard to the problems of placing a ban on used imported cars and to loose the restrictions placed on trading with India.
In contrast to this, PM gave orders to government officials to make the future policy in collaboration of and keeping in view the interests of industry officials. Usman Malik, Chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) said “We are hopeful of getting government support including the national car policy that the prime minister indicated in his speech at the Pakistan Auto Show 2014.”
With regard to the orders of PM, Mr. Malik seemed optimistic and said it would help bring some policy changes for the industry. He said “We’re especially looking forward for the national car policy as it will support the local manufacturing and assembling industry.” Mr. Malik is the head representative of 2,800 industrial units that produce auto parts.
Independent variables like liberal trade with India and country’s import policy of used cars is affecting the dependent variable which is the future of auto assemblers in Pakistan.
Many industry analysts believe that government is facing pressures from both carmakers and car importers, due to which there has been unexpected delay in the disclosure of Auto Industry Development Program II (AIDP II).
Analyst Atif Zafar, JS Global Capital while sharing his point of view with regard to this delay said “The government seems confused over the much-awaited AIDP II, which is why it has taken several months in announcing it. It is certainly under pressure from carmakers and car importers who have considerable influence in government circles.”
Different opinions are arising because of this delay. Some believe that incentives will be given to car assemblers; however, some say that the age-limit for used cars will be extended by two years, making it five years.
Restrictions on liberal trade with India remain another problem for auto industry. PAAPAM is the only representative body of auto parts’ makers and wants the government to promote the trade between Pakistan and India of auto industry related products. Pakistan’s largest carmaker, Pak Suzuki is supporting this idea of PAAPAM.
The reason why Pak Suzuki seems more interested in this idea than Honda Atlas Motors and Indus Motors is because it can import cheap parts for its cars from Suzuki Maruti (an affiliation of Suzuki Japan having more than 50% market share in India).
Mr. Zafar also conveyed that the impact of having liberal trade with India will be higher for auto part makers than the local car assemblers.
He further said “In case Pakistan and India start trading, the likelihood of Pakistan importing car parts is much higher than the import of Indian cars. This is why Pakistani car part makers are more exposed to competition.”
Auto part makers in Pakistan are just looking forward to gain assurance from the government that a liberal trade regime with India will not cause any problem to their interests, said Syed Nabeel Hasmi, former PAAPAM Chairman.