Auto industry contributes Rs 64 billion revenue to national kitty

With total investment of Rs 92 billion and 0.4m job opportunities, the local auto manufacturing industry has contributed substantially to the growth of national economy. Despite some challenges and regulatory issues, the local auto industry has been flourishing and is one of the vital contributors to country's GDP growth.
The industry manufacturers and vendors have paid total revenue of Rs 64 billion last year while the industry has saved foreign exchange of US $1,500 million during the same period. The prices of cars have been increased by only 14 percent in last 2 years whereas the price of steel has increased by 16.5 percent, aluminium by 50.5 percent and polypropylene by 127 percent, minimum wage has increased by 75 percent, electricity and gas increased by 51 percent and 43.6 percent, respectively, during the same period. Besides this, the depreciation of Pakistani rupee also played its role in increasing pressure on the industry, like the US$ increased by 20 percent, Japanese Yen 66 percent and Thai Bhatt 22 percent.
Moreover, the duties on CKD in Pakistan are much higher than other regional countries. CKD duty in the country ranges between 32 to 50 percent, while in Thailand it is 30 percent and in India it ranges between 10 to 30 percent. One of the major players of local auto manufacturing industry, Indus Motor Company (IMC), while nullifying the stereotype image of the industry, has contribution of 1.5 percent/year to the national economy growth.
In addition, it has increased its production capacity from 20 units per day in 1993 to 85 units per day in 2002 and 210 units per day in 2011. The company also created huge job opportunities as its number of direct employees increased from 496 in 1993 to 1,102 in 2002 and 2,180 in 2011.
While commenting on IMC's performance, CEO IMC, Parvez Ghias said that the buyer's trust on the quality of the company's products can be gauged by the fact that the company's unit sales increased from 11,000 in 1993 to 23,097 in 2002 and 51,000 in 2011. Similarly, its units' production increased. On the part of dealership, the company's 3S dealership increased from 21 in 1993 to 24 in 2002 and 34 in 2011 and of the total 34 3S dealership, 8 are in north region, 16 in central region and 10 in south region. The company's 3S dealership will increase to 66 till 2016; 2,930 in 1993 to 20,531 in 2002 and 50,759 in 2011. A consistent long-term policy for the auto industry will create more investment and job opportunities in the industry which already has an investment of over Rs 92 billion and giving employment to 0.4m people directly.
Localisation is the key factor meant for progress and growth of the national economy, however, tariff reduction and used car imports are two major issues of the local manufacturers that must be considered prior to formulation of any policy. Any reduction in duty structure will make local nascent industry uncompetitive, which will lead to complete collapse of the industry, therefore, causing more unemployment.
"Although there is a very short-term benefit in the imports of used cars but on the long-term basis this policy is against the national interest," said Munir K. Bana, Vice-Chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM). Shaikh M Aslam, Secretary PAAPAM, while pointing out one very important factor said that frequent shift in policies on the part of the government along with security risks and high input costs have been conducive for incessant decline in the Foreign Direct Investment (FDI) in the country.-PR