Stakeholders demand 10-year auto policy of automobile industry
KARACHI: To materialise investments in auto sector, the stakeholders of automobile industry have proposed four measures to the government including an urgent announcement of a 10-year auto policy for the period of 2015 to 2025, to be reviewed after 5 years.
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) stressed to set up a dignified consultative process by taking the representatives of car makers and parts manufacturers in the country onboard and offer them full support to bring foreign investment to set up new capacities in auto assembly and in production of localised parts.
PAAPAM also demanded that the government must agree upon a 3-year road map with the auto industry, setting time frames for capacity expansions and introductions of new models by local assemblers as oppose to the curtailing used car imports.
Stress was also laid that a committee of 8 to 10 stakeholders, including government, OEMs and PAAPAM, should be set up to focus on passenger car segment issues such as growth, investments, taxes, employment, product line-up and future market volumes.
‘‘The first auto policy expired in June 2012 and the industry has been waiting for over three years for the new policy prior to proceeding with the investments plans,’’ said PAAPAM Vice Chairman Mehmood Alam Sherani.
He stressed over the importance of finalisation of auto policy without any further delay as it would give clear signal for investment by OEMs and the vendors, who are ready for setting up long term investments in the country.
‘‘The upcoming auto policy is an opportunity for the government to persuade the existing auto assemblers as well as the 1,600 auto parts manufacturing companies to make fresh investments and set up new plants to create additional capacity to meet the rising auto demand in the country,’’ he added.
He said the policies should be made by keeping national interest in focus and not just for the benefit of few traders, adding that Pakistan auto industry employs over three million people, directly or indirectly.
He said that the country, with a population of 200 million, desperately needs avenues to create employment opportunities, as the auto industry can help in providing jobs to youth, which comprises around 50% of the country’s population.
Discussing the impediments, former PAAPAM chairman Aamir Allawala highlighted that the period from the year 2008 to 2013 was extremely testing for the auto sector in Pakistan, adding that all stakeholders were sceptical towards long term investment in the country.
He said that in 2009, the total market size crashed by almost 60% from an annual volume of 254,000 units in 2006-7 to below 100,000 units in 2008-9. “The Pakistani rupee depreciated by 55% against the US dollar, from Rs 61 in June 2007 to Rs 95 in June 2012. Inflation level and interest rates exceeded 20% and consumer financing for automobiles dried up,” he added.
He advocated the collaborative strategy between the government, car assemblers and parts manufacturers to bring massive amount of foreign investment in Pakistan, set up new plants, launch new models at lower prices and provide value added jobs to thousands of engineers and graduates in the country.
He stressed that in addition to offering incentives to new entrants, the government needs to cater the existing players in the industry and give them confidence to make long term investment in new plants. “A new auto plant with capacity of 150,000 vehicles per year, along with 50% localisation of parts requires an investment of around $500 million. Suzuki, Toyota, Honda and their local parts manufacturers are perfectly capable to make these investments that would lead to revival of industrial growth in the country,” he added.
It takes 2-3 years on average to set up a new plant for automobile assembly. If expansion in domestic industry is not immediately undertaken, demand for autos will outstrip its supply, causing increase in delivery lead time and attracting investors to hoard and create premiums in the secondary market, he reasoned.
Former PAAPAM chairman Munir K Bana said that an upfront policy would trigger growth in auto sector, which ultimately addresses the key challenges that are currently being faced by the government including stimulation of foreign and domestic investment, increase in tax revenue through increased production of cars and employment generation by localisation of 50% parts in the country.