Pakistan is definitely on the international investors’ radar and the auto industry that has for long been dominated by Japanese players is poised for a face-lift.
In the latest development, German carmaker Audi AG has expressed its interest in setting up an assembly plant in Pakistan and, through its authorised importer in the country, submitted a letter of intent to the Board of Investment (BoI) for consideration.
Ali Khan, head of automotive at Premier Systems Private Limited, which is the authorised importer for Audi AG in Pakistan.
“Audi AG has expressed the interest via its authorised importer in Pakistan to set up an assembly plant in Pakistan,” Ali told The Express Tribune, adding that land for the plant has been purchased in Korangi, near one of Pakistan’s biggest industrial estates, and would mean a fresh investment of over $30 million.
Audi AG is represented in different countries through either authorised importers or assembly/manufacturing plants – the latter investments coming after the country has shown enough appetite for the luxury brand. Pakistan is one of 57 countries where Audi AG is represented by an authorised importer.
“Audi AG first signed a memorandum of understanding with the Sindh Board of Investment (SBI) to consider Pakistan as a potential market in May this year. We studied the automotive policy (approved by the government in March) to see if it’s a viable case. After three-and-a-half months, we, on behalf of Audi AG, sent the letter of intent to BoI, expressing that we would like to assemble vehicles in Pakistan.”
Historically low interest rates, rising middle class and growing appetite for international brands have meant that Pakistan has become an attractive destination for foreign investors. French manufacturer Renault has already announced its intention to partner with Ghandhara Nissan to assemble vehicles in the country where consumers are desperate to see variety after being restricted for choice for decades.
Macroeconomic stability, improved security situation, and a government widely perceived as pro-business have further incentivised international companies.
“People are hungry to see a new brand. Lower interest rates have meant that vehicles are more affordable. The fact that 40,000 vehicles are imported into the country through the grey market means there is ample room for Audi.
“The reason why we would like to assemble cars in Pakistan is to help reduce the grey import of used cars. It means a warranty and an after-sales service within the country.”
Audi currently sells 900 imported units a year in Pakistan, a number Ali expects to go higher once the assembly plant is given the go-ahead by the BoI. The country incharge for Pakistan and Bangladesh also foresees the prices of lower-engine models to decrease in the range of 5-10% if assembled in Pakistan. “It depends on what the government offers us. But I feel a 5 to 10% decrease in prices should happen. With regards to the heavier engine models – over the 1.8L categories – I see a much bigger decrease of around 20%.”Ali’s explanation means the A3 model, currently priced at Rs4 million, could come down to between Rs3.6 million and Rs3.8 million.
The new auto policy
However, the official said the current auto policy needs to include a feature that caters specifically to brands like Audi, BMW or Mercedes. “There has to be something that caters specifically to these brands. Globally, this is the case. We do not compete on volume. The plant in Karachi could go up to a maximum of 5,000 units a year.
“One needs to understand that Audi is a luxury brand, therefore there are certain conditions attached in the assembling or manufacturing of our vehicles. Sourcing local components at this stage is just not possible, as there are neither vendors nor material available in the country. However, we believe given time; 10-15 years down the line Pakistan can be a country where any luxury manufacturer could source local components for the assembly / manufacturing of their vehicles. The vendor industry in any country adapts automatically to supply and demand forecasts.”
RENAULT
French automobile manufacturer Renault will start assembling cars in Pakistan by 2018, the Board of Investment (BoI)revealed on Thursday.
“Renault has decided to invest in Pakistan. They will start assembling cars in Pakistan by 2018,” the BoI said in a statement, claiming the development was the outcome of the “hectic efforts and persuasion” by Finance Minister Ishaq Dar.
“During Eidul Azha holidays, Finance Minister Ishaq Dar and Dr Miftah Ismail, chairman BoI, visited France and met the top leadership of Renault,” the communiqué added.“The company will invest $100 million to expand the capacity of Ghandara plant where it will assemble the vehicles”, said Miftah Ismail, Chairman BoI told The Express Tribune.
Pakistan has long been struggling to bring at least one foreign new brand to break the monopoly of the existing three dominant players.
The Duster could be available at a price of around Rs2.5 million, which is even lower than the prices of 1500cc Japanese made cars, said the Board’s officials. The company will also introduce up to 1200cc cars to cater the needs of the upper-middle class, the officials added.
The finance minister had in September met representatives of the two vehicle manufacturers in Paris and briefed them about the country’s automobile policy, which offered attractive incentives and concessions to foreign investors.
Pakistan wants to shake up its Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, whose locally assembled cars are sold at relatively high prices but lag behind imported vehicles in terms of quality and specifications.
Established in 1899, the automobile company produces a range of cars and vans, and has also manufactured trucks, tractors and tanks, among others vehicles in the past.
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