Magazine article Economic Review

Indigenization for Higher Sales Growth of Automobile Industry

Magazine article Economic Review

Indigenization for Higher Sales Growth of Automobile Industry

Article excerpt

Pakistan is a populous country of over 160 million people aspiring to move ahead in all spheres of its economic growth and development. The genesis of our automobile industry in Pakistan takes us back to 1963 when the nascent automobile assembly in the country was first set up for Bedford Trucks with CKD imports from Vauxhall Motors, U.K. Then General Motors Overseas Distribution Corporation, USA and later re-titled as Ghandhara Industries Ltd. was a name that Pakistanis felt proud of. It was later followed in quick succession by other automobile assemblers for cars, jeeps and trucks.

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Until early 1960's the British, German and American vehicles completely dominated the growing domestic market though there were also few imports from other European countries as well. It was in the first half of the 1980's that Japan entered our market with introduction of Toyota Corona cars which was there in direct competition with other European cars in the likes of Volkswagen, Morris, Hillman, Austin, Ford, Opel and few others. Within a decade almost all the European cars were virtually off our roads and the new entrants were the Japanese and the Koreans.

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Suzuki Motor Company had the vision to correctly evaluate the growing market needs and set up it's automobile assembly plant by introducing cars, pickups and vans in the engine capacities of 800cc - 1300 cc, catering mainly for the lower and medium income groups which was a large growing segment that made their investment feasible. This was followed by the growth of downstream automobile vendor industry for providing cost-effective indigenous parts. Indus Motor Company followed by Honda Atlas Cars made entries to cater for the middle and upper middle end market segments, with the introduction of 1300 cc - 2000 cc cars. Later other makes of Japanese and Korean automobiles and assemblers also made entries to the market.

An overview of the past five years of car sales(as tabulated below) when categorized into two broader categories based on engine capacities, enables us to witness that the highest production and sales volume exists in the 800cc. - 1200c.c. range, followed by 1300 c.c. - 2000 c.c. range.

It is observed that the lower and middle income group constitutes the target market for higher growth and in order to achieve and sustain it will require an affordable, fuel efficient quality vehicle that will cater to the comfort of the users.

This large customer segment needs to be tapped who are waiting on the side lines for acquiring a safer and better transportation needs and this can be possible if our auto and vendor industry adequately invests in higher technology and skills to be able to provide locally developed quality parts for vehicles at competitive prices which will in return generate the volumes for economies of scale transportation by acquiring latest arising from the higher demand.

We can either continue to manufacture of all components maintain our lackadaisical approach in not fully indigenizing the parts for the automobiles to bring down the, cost of the vehicle and the prices to affordable levels by maintaining status quo or proceed ahead keeping in view a large and a growing population with it's needs for safer transportation by acquiring latest technology for complete local manufacture of all components used for manufacture of cars as this will be the path to improve productivity and reduce cost.

Pakistan today proudly claims to be the world's cheapest producer of quality tractors, which has not only been able to sustain all the threats of the external environment but has continued to progress on the path of growth and profitability. If we can do it in tractors we can very well do it for cars provided our multinationals are willing to invest in the complete transfer of technology including the local manufacture of all engine and transmission components. …

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