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In the coming months, competition within the automotive industry could get intense, as the industry enters a new, almost evolutionary phase. Key trends that are already emerging may set the tone for the year that will be 2021, but what’s absolutely certain is that it will be a major shift from the dreaded covid-year.

One, demand is growing. Sales grew 30 percent in 5MFY21 against last year, including Hyundai and estimated numbers for Kia’s Picanto and Sportage. Granted, this is compared to a low base of FY20 and FY19 where demand remained consequentially stagnant. However, the recovery was much-needed and the trend is upward. Kia’s success, though only estimated volumes are known, is clear. Sources suggest Al-haj/FAW and Master Motor/Changan having already introduced new cars are also providing budding opposition to Japanese cars.

Then there are a host of new players ready to dip their feet in the proverbial pool that is the rather small automotive industry. From British MG Motors to Volkswagen to Malaysian Proton to Chinese Dongfeng—there is no shortage of interest. Both Kia and Hyundai are also planning new model launches come 2021.

What is evident however is that new entrants as well as existing automakers are focusing on the higher-end segment, particularly SUVs and crossovers. Many believe that there will be a pronounced shift within the industry from sedans to larger vehicles, and the latter will steal some of the market share from the former. This however lays bare one glaring problem—if cars are becoming luxurious, will they be accessible to a large share of the population or will they continue to serve a certain segment of the economy. Also, recall how much more expensive passenger vehicles have become over the past two years.

Second, while competition is healthy, will it actually lead to reduction in prices as witnessed over the past decade within the motorcycle industry? The latter has massively expanded with several new bike makers now assembling locally that pushed established assemblers to localize more and lower prices. Competition will only yield positive results if there is rapid improvement in car demand—or volumes. If market share is merely moved around from one company to another and volumes are divided between passenger cars and SUVs without any substantial expansion, prices will more or less remain the same.

Third, auto financing is playing a pivotal role in demand growth. But with new players coming in, where market does not have an estimate on the models’ resale value, especially in the case for Chinese brands, adequate auto financing products will change the game, for better or for worse. As it stands, banks are not offering the same products for these Chinese models than they are to Japanese. For instance, a consumer can get Suzuki’s Alto at 15-20 percent equity contribution but will have to pay at least 30 percent to purchase Prince Pearl. This puts new investors at a clear disadvantage, which in the case of Chinese models, who are already fighting a perception battle is another pressure point.

However, what they lack in experience (and presence), they are making up for in enthusiasm. Master Motors that is assembling Changan vehicles has already negotiated an affordable financing deal for its family van Karvaan with Bank Alfalah and Regal Automobiles which is assembling Dongfeng’s SUV Glory Pro is in talks with banks to provide their vehicles better terms as well. They are pushing!

Fourth, perhaps the most important transition the industry would make is the move toward electric vehicles. Though a lot needs to be done—from familiarizing the market and consumers to the EV technology, to establishing a strong EV infrastructure, to ensuring new entrants are compliant with safety and quality standards, to ensuring that EVs will be affordable enough. But the policy has kicked off which means, some EVs are coming! The policy may evolve as the government learns from successes and failures but there is no doubt that the technology will shake some quarters. It will certainly have strong implications for existing players that are making internal combustion engines and have no EV plans.

What’s great is that new players, particularly Chinese, are ever more open to introducing their parents’ EV technology to Pakistan, which in the case for Japanese assemblers will prove difficult to even impossible. The Chinese are setting new trends in EV production which will spill over into their manufacturing contractors in Pakistan—a win-win!

The year 2021 will be different, if challenging. But consumers will have more to choose from, with not only a wide variety of models but a variety of engine sizes that were never available before. Automakers, on the other hand, will really have to fight for precious market share. By virtue of being fresh, new assemblers have an eagerness to perform well in a new market which will at least put them in the ring, if not ahead of existing players that have become complacent over the years.

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