A few days ago, Hyundai Motors signed a contract to provide 200 units of its Korean trucks to Pakistan which includes a variety of tractor trucks, dump trucks and cargo trucks. There hasn’t been a dearth of interest from other global players. Earlier in June, Swedish auto giant Scania announced it had signed a deal with Dewan which would serve as a local distributor for its trucks, buses and coaches. MAN Se and Volkswagen have both indicated they intend to set up assembly plants with the latter in talks with its local distribution partner.
Logistics and freight forwarding companies will be driving this demand not only to service CPEC transportation needs through the multitude of its projects across the country, or rising imports, but also a visible demand increase in retail, food, construction, and industrial sectors. Prominent local assemblers saw a growth in sales for trucks and buses from more than 3,200 units during FY14 to more than 8,600 units during FY17, according to PAMA. In year on year growth, trucks and buses grew by 31 percent between FY16 and FY17. Imported parts for LCVs have also grown substantially. It is expected sales will reach 10,000 units during FY18 as at 4MFY18 mark, sales have been over 3,000 units.
However, total sales across the country are likely higher as FAW, Sino trucks, Daewoo, Mitsubishi, Volvo and others are all either assembling or distributing in the country. An additional annual estimate range from 2,000 to 3,000 units from these players. FAW has just undergone an expansion and signed on a deal with Hyundai to assemble those trucks at its plant in Port Qasim. Having said that, Pakistan is far from a major LCV manufacturing nation. Companies that manufacture these trucks apart from perhaps HinoPak (but not even that) do not have scale. As a point of comparison; India, Thailand and Turkey manufacture upwards of 500,000 LCVs a year.
Greater logistics needs do not only require vehicles to transport material from location A to B but the right technology, and quality to meet those needs. In transportation of chemicals and pharmaceuticals for instance, vehicles are supposed to have the right climate settings with safety contraptions. Meanwhile, the quality of the vehicle also has to be at par with global standards in order to be able to maneuver high altitude routes and not destroy the new roads and highways that are being built.
Some estimates suggest that the current capacity of 20,000 to 30,000 units will have to be expanded to 100,000 units to the existing network of heavy and light commercial vehicles to cater to the CPEC related demand. Current production is only 10 percent of this so the investments that are coming in are not enough and existing assemblers do not have the capacity- yet.
The second problem, as this column has talked about over the past two years, is the urgent need for a functioning trucking policy that tackles the issues of overloading on roads, registering of trucks and financing of trucks; imposes regulations for modernized and containerized trucks to transport cargo from ports and creates benchmarks for quality and safety standards. This would discourage the use of resold and reused Bedford and other open, low quality underpowered trucks used to transport constructions and industrial materials which wreak havoc to each fragile road they cross.
But the policy focus is direly missing from the conversation, even if it is part of government plans awaiting implementation for years. This certainly adds to the cost of business and is not investment friendly so it is likely much of the interest being shown by these global players will not materialize at all.
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