Automotive Development Policy (ADP) 2016-21 has given a new hope to the automobile industry of Pakistan, where international brands have now agreed to start manufacturing their vehicles in Pakistan.
This new development has raised concerns among the three big automotive brands in Pakistan, Suzuki, Toyota & Honda, who currently have monopolized the market. These brands have previously been vocal, telling the government to revise the ADP-16 as it can cause hindrance in their business of selling substandard cars to Pakistanis.
Suzuki Motor Corporation (SMC) of Japan wrote a letter to Finance Minister Ishaq Dar, promising a $600 million investment if and only if the government accepts their terms. The Japanese auto company previously said that it had concerns over the ADP-16 and that it may damage the current investment in the Pakistan’s Automobile sector by existing players.
In a press release on their website, Suzuki declared: “If the incentives and benefits promised to new investors should be given to the existing players too, then we are ready for $460m investment in Pakistan.”
Now, the company is taking proactive measures to get the attention of the government by luring them to change their policies with $660 million total investment by Pak Suzuki Motor Company (PSMC) and its vendors. the letter read:
“If the same two years (of) incentives and benefits are given, then Suzuki is committed to investment in setting up a state-of-the-art new greenfield plant and it would introduce new and advanced models.”
The car market in Pakistan has been monopolized by Japanese brands. For years the Pakistani customers have been forced to buy substandard cars at a very high price rate. We can still see the old wretched Suzuki Mehran out on the streets in the day and age when technology has enabled much advancement in the automobile industry.
Suzuki Mehran, the second generation of Alto and the successor of Suzuki FX, had a lifespan of 1984 to 1988 in the international market but in Pakistan, we won’t get rid of it until 2018. The 800 cc ancient reminder of automobile industry over the years has only seen technological advancements in the shape of some variations of headlamps and bumpers, a radiator grill and two less air-conditioning ducts in the dashboard.
The major reason the car is still popular among the masses, there is no one to compete with them in this category. The build and quality provided by Suzuki has declined over the years, but their prices suggest that they are selling a luxury car rather than a simple vehicle with no technical ability whatsoever.
Some say that Mehran saves them fuel as it is a small car. They’re pretty much wrong as the car lacks five-speed transmission and consumes more fuel than any other modern engine with a similar capacity.
The big-3 monopolists for years have taken the Pakistani customers for granted and have created a large sum of money by providing us with the cars that won’t even pass the safety and security checks abroad. It is 2017, and we still don’t have airbags in our cars. Moreover, only a few and limited cars have seat belts for the back seats.
Recently Pak Suzuki announced that it is replacing Suzuki Cultus with 1,000cc Celerio, a move made to impress the government so they can also let them have some of the benefits of the ADP-16. A company official condition of anonymity told the Express Tribune in December 2016:
“We are confident that the government will provide some incentives to us under the new auto policy. Therefore, the company has decided to launch its standard model of Celerio in March 2017.”
So in other words, the policy shown by Suzuki is that threaten our profits and we will introduce more models, otherwise who cares? Now when five major international brands are making its way to the automobile industry of Pakistan, Pak Suzuki wants the government to give them the same tax incentives for two years and in return they will make a total expected investment of $460m, which includes foreign investment of $250m inclusive of an 80-acre plot already purchased by PSMC.
Investment generated locally through the company’s reserves, and bank borrowings will amount to $210m. The vendor investment is expected to be $200m while the annual volume of local parts purchase is expected at Rs18.72 billion.
In a letter, the Japanese company also informed the government that this investment would lead to the creation of total 350,000 direct and indirect jobs. Their new plant would have the capacity of producing 100,000 vehicles per year and will start producing new models within three months of the plant’s completion.