The Year of Cars!

After nearly decades of stalling and tip-toeing around the subject, the government has finally bid farewell to used cars (or so it seems). But who wins? The fate of every new car buyer who was slowly finding his financial footing, preparing to buy a small affordable car—either for personal use or to start the lucrative business of ride-sharing—is now tied to the three existing carmakers. And of course any new auto players that may arrive. Naturally, this discussion was needed; but this seems a premature time to have it, as most have not divulged finer details of their plans. In such a case, we rely on patchy information.

The last time this column attempted to list all the plans, we had to consider Pakistan Suzuki’s potential investment of $460 million for a new plant, and Ghandhara Nissan’s $100 million investment with the Renault-Nissan bringing the French cars to Pakistan. A lot has changed since.

Now Renault is coming with the Al-Futtaim group, a leading family-owned group in the UAE, whose subsidiary in Pakistan, Al-Ghazi, manufactures tractors in the country. The construction of the plant should commence any day now given government approvals.

Though the excitement over the past two years was at the prospect of European cars in the market, assembled right here at home, it is actually the Asians that are hitting it out of the park, the novelty of Europeans notwithstanding.

Chinese trucking giant FAW together with Al-Hajj group has already launched its locally assembled 1300cc V2 cars, which it was importing earlier. Other Chinese brands might be seen on the roads soon too. United Motors that manufactures motorcycles in Pakistan intends on bringing small Chinese cars to the market. Meanwhile, the premier rickshaw manufacturer, Sazgar Engineering announced investment of Rs1.7 billion to bring another Chinese brand to Pakistan, and hopes to launch models by early 2019. These plans sound ambitious.

Meanwhile, front and center are the Koreans with Kia and Hyundai together with local partners, Lucky and Nishat. While Lucky group is putting in Rs14 billion into the new plant, Kia’s investment has not been disclosed. Hyundai-Nishat could bring in an investment to the tune of $500 million. The wheels are already in motion for these companies who have signed on with the government and now working on bringing dealers and auto parts vendors on board while hiring management and labour teams. It is clear that this is the year when most of these manufacturing plants will kick into first gear.

But now that we have a working list of newcomers, we have a more difficult task on our hands—to determine how this will change the car economy aside from just expanding market size. With used cars nearly gone, will these new cars be enough to satisfy the appetite of the market? Both in terms of variety and choice. Will these car makers localise enough to bring down costs and, ultimately prices? Will the variants be affordable to the average middle class consumer who is coming up in the world? Will these new cars give competition to the existing players; and push them to invest, localise and innovate more? These questions and more, this column will attempt to explore further, as we kick off the Year of Cars!