Consider this. Last fiscal year marked the highest ever truck sales in Pakistan. The CAGR between FY15 and FY18 was a phenomenal 22 percent against 3 percent in the FY04-14 period. Also consider this: Chinese and non-Chinese investors have been lining up to grab the proverbial pie, spurred on by CPEC excitement and the new auto policy. Why it is then that local manufacturing is treading backwards? If sales for pickups and trucks keep falling, at the current rate, trucks sales will have declined by 24 percent and pickup sales by 18 percent by the end of FY19.
It isn’t every day the likes of Swedish Scania, Mercedes Benz, and Volkswagen eye Pakistan. A lot of the interest has translated into long term plans. Ghandhara Industries has launched a range of Isuzu pickup trucks. Its subsidiary, Ghandhara Nissan is launching a range of Renault trucks. Pakistan’s JW Group and Foton China are launching an assembly plant to produce cargo and dump trucks. Hyundai Motors is bringing Korean trucks while Master Motors will also bring new assembly with Chinese Chongqing Changan. A couple more Chinese players are weighing in.
All signs were pointing toward an expansion in the sector. Aside from the infrastructure development, the logistics industry was all set to grow on the back of greater retail activities, and more sophisticated logistics solutions sought by industries and services sectors. CPEC and trade related activity was a surefire. From the existing capacity of 20,000 units of trucks, stakeholders tossed around big numbers. Expansion would go up to 100,000 units, easy, they said.
But let’s dial back. Are we buying what they are selling or are we moving toward more underutilized capacity? The ban on non-filers to procure vehicles, higher diesel prices, depreciating rupee, higher cost of vehicles exacerbated only further by higher cost of borrowing are all curbing the enthusiasm. There is also a selling spree in the market of old or used trucks by oil transporters. One could argue that these are all short term. But there is a much bigger problem at hand. Demand drivers certainly exist but for the immediate term, it is clear that the market is pensive, and uncertainty has once again reared its ugly head.
Most logistic players are waiting on a signal from the government on policies. The DFID-funded and ADB administered National Transport Policy was created and approved by the previous government at some point last year without much fanfare. That is an important direction that domestic and foreign investors (non-Chinese?) need, and certainly the local logistics industry requires to determine its role and involvement in the larger scheme of growth. Moreover, regulations and quality standardizing in the sector were meant to push the freight forwarders and trucking companies to replenish their retired fleets which will not happen until the policy gets implemented.
Despite the importance of the logistics sector (which covers the entire breadth of road, rail, air and maritime transportation modes), and its interconnection with CPEC related activities, the silence on the part of the PTI led government on the subject is unnerving. Let’s hope that their slogans of “we have been busy” have not just to do with putting out fires.
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