Yesterday, the government made a huge move to weaken the monopoly of three big automobile companies in Pakistan by granting approval to three big companies to open a manufacturing plant in Pakistan. The major shock coming from the said approval was the lack of European automakers.
Last year, the government introduced a new Automotive Development Policy (ADP) 2016-21 to facilitate the new automakers to establish their assemblies in Pakistan. following this move, a lot of buzz was created about the arrival of Renault and Volkswagen in Pakistan.
Sadly, out of the nine companies that sought permission to establish manufacturing plants, none of them belonged to the European auto industry. According to the Express Tribune, despite the Board of Investment’s optimistic approach, Renault and Volkswagen never submitted their application to set up a plant in Pakistan.
The three companies that got the official go ahead include, Nishat Group, KIA-Lucky Motors and United Motors Private Limited. These companies will bring a foreign investment of around $372 million where Lucky-Kia will be investing $190 million, Nishat Group $164 million and United Motors $18.1 million.
This decision just came days after the Prime Minister, Nawaz Sharif abolished the Engineering Development Board (EDB) on the allegations of corruptions and creating in the creation of new manufacturing plants in Pakistan.
The revised auto policy was aimed at attracting the new European car manufacturers, a move which hasn’t completely worked out for the Ministry of Industry and Production which will soon enter into a separate agreement with the approved auto companies.
The Ministry hopes that after the auto policy will get a stronghold, the European brands will come rushing to the country. Recently, the government did not cut customs duties on the import of completely built units (CBUs) by 10% from July 1, 2017, thus violating the auto policy 2016 which is not a reassuring move for investors.
So to create an environment of trust, the government needs to ensure consistency in auto policies to create long term relations. Nishat Group alongside Hyundai will set up a greenfield project for assembly and sales of HMC passenger and 1-ton range commercial vehicles in Pakistan.
Lucky Cement will have 60% share in the joint venture with KIA Motors where it will make an investment worth $150 million. United Motors will set up a plant in collaboration with the Chinese company.