Asim Ayaz, General Manager Policy at Pakistan’s Engineering Development Board (EDB), said on Saturday that quotas for seven new entrants (auto companies) have been opened after it was legally established that agreement with them supersedes the law - Statutory Regulatory Orders (SROs).
However, the EDB official said that quotas will also be opened for established auto companies soon but it will only be till December and OEMs (car companies) and parts manufacturers will have to sit down and have to chalk out a concrete plan.
Ayaz was speaking at a symposium on ‘The Future Drive: innovations, exports, trends, and way forward for auto parts manufacturers’, which was held on the second day of the Pakistan Auto Show on Saturday at the Karachi Expo Center.
The government did not renew manufacturing certificates for car companies on its expiry because they failed to achieve the export target, which they mutually agreed with the government in 2021.
Ayaz said that the government reluctantly took the decision to not renew licenses as “we did not see a serious response from OEM”.
“The government is even now open to incentivising exports,” he added.
“Just like the private sector doesn’t want to fight the government, the government also doesn’t want to fight the private sector.”
Meanwhile, explaining the reason behind the new entrants getting the green signal, he said the government entered into an investment agreement in 2020, and the SRO came in 2021. The question was if the law was more superior then the agreement, and the ‘comments’ (by legal experts) suggested the investment agreement was superior and therefore, they should honor it.
Meanwhile, he added that the period ended in June for the sector to achieve and show its export target of 2% (of their total imports).
However, the government waited another three months but still the companies did not provide a concrete plan and hence, the government reluctantly took the decision to stop their shipments.
“Government doesn’t think stopping shipments benefits anyone.”
He added that less than three years are left for the new entrants as well.
“After that, they will also have to localize as well.”
Renowned economist and head of research at Business Recorder Ali Khizar endorsed the government’s decision to push the auto sector for exports and criticised the sector for its ‘infant-industry’ argument.
He said that the industry was supposed to follow a deletion programme and gradually increase localisation.
Meanwhile, auto sector expert Mashood Khan said that the country has always lacked a long-term localisation vision.
“If the government is genuinely committed to boosting the engineering goods export, it’s essential to lay out a clear vision and roadmap that spans at least the next 25 years,” Khan said.
“This long-term view is crucial for strategic planning and sustainable growth,” he said on the occasion.
“The future of technology is moving towards electric vehicles (EVs), and there’s a significant opportunity for Pakistan to step into the global market by manufacturing EV chargers. With a strong base of auto parts manufacturers, the potential is certainly there, waiting to be harnessed.”
Imtiaz Rastgar, an export specialist, discussed export possibilities for light engineering and vendor industries and said Pakistan’s vendors need to enter the world market.
“The options for vendors and parts manufacturers are quite high. These include orthopedic implants, hardware and building material, gearbox market, steering wheel, hydraulic pumps, pistons etc.,” said Imtiaz.
Danial Malik, Chief Executive Master Changan Motors, said in his address that Pakistan has one of the lowest motorisation ratings with 17 vehicles per 1,000 persons including two-wheels.
“We need to have strategic free trade agreements with RHD and CBU markets and give incentives and subsidies to grow our auto industry,” said Danial.
Former chairman PAAPAM Aamir Allawala said diversification is the way forward for auto part manufacturers by expanding operations into new, unrelated products, services, markets and industries.
“The auto parts manufacturers are facing many issues including continuous pressure from OEMs to reduce cost and prices, erosion of profitability due to cost inflation, profits freezing, and increase in input costs,” said Aamir.
He added that joint ventures with China are a great opportunity for Pakistani businesses in this period of crisis as China is looking for alternate markets.
“Increasing labour cost (around $700/month) and imposition of 25% duties on ‘make in China’ products by the United States are the main reasons why China can invest in Pakistan,” said Aamir.