Trucks in transition?

Global commercial vehicle giants have been eyeing Pakistan for some time- and for good reason. Much of the growth in the sector expected to pick up over the next few years is because of the roads, motorways, and highways that are being built as well as greater trade and transport expected due to CPEC and overall development in the country. Imports have gone up by 20 percent year on year in the past ten months or so but this is merely the start.

Once the motorways and highways are in operations, the activity from China to Pakistan, within Pakistan and outside Pakistan will be unprecedented. Some estimates say nearly 20,000 trucks will be enroute at one point on the roads. Much of these will be Chinese trucks but a huge portion will be Pakistani trucks administered by Pakistani logistics companies.

While current local production is still less than 1,000 units annually which is insignificant compared to emerging economies in East Asia and Pacific that are producing hundreds of thousand trucks and buses everywhere (see graph). But all the signs for substantial growth are there: current truck OEMs in Pakistan manufactured 40 percent more in 11MFY17 against this period last year. Import of completely built units (CBU) trucks and buses have grown by 49 percent and by 22 percent for import in completely knocked down (CKD) form in 10MFY17.

While existing players may be soon be expanding their existing capacities to cater the demand, Chinese, European, South Korean, and now Swedish brands are all vying to get a piece of this fast growing pie. From MAN Se to Volkswagen to Hyundai, trucks in Pakistan are getting a huge overhaul in terms of size, quantity, quality as well as variety. (Read our story: “Can we run with the bulls” for more details on new ventures).

Most of the new players will set up assembly plants while others will just sell locally with a distribution partner, like Volva has done in Pakistan for years. The latest addition to the line-up is another Swedish manufacturer Scania which has signed an agreement with Dewan Motors to distribute heavy commercial vehicles in the country. There are as many as ten new commercial vehicle manufacturing and/or distribution ventures up and coming. Combined with the 7-8 existing local brands, there will be a lot of healthy competition. Perhaps more of these trucks will also drive out the last mile delivery trucks currently on Pakistan’s roads that are a sight for sore eyes, are resold many times over.

Whereas the auto policy is making it possible for new players to enter, on the logistics front, there is still no trucking or transportation policy (once written in 2007 but never implemented) that would maintain standards, quality and safety in trucks that are in use, ensure better fuel usage and efficiency and curb the largely informal logistics sector that makes it impossible for standards to be enforced. Without developments on these fronts—without, in fact, making quality a primary benchmark—supply will follow demand and may not necessarily come from the giants that are entering the playing field because there will always be cheaper, low-quality options available. Something to think about.