Analyzing Pakistan’s Automotive Industry – Global Village Space
The automotive industry is one of the most important economic engines in the world. Nearly 18 million well-paying jobs directly and millions indirectly are provided by this sector. The annual global production of 4 wheelers is around 100 million. In 2020, the total global manufacture of motorcycles reached around 49 million units. Oil, gas and now electricity are also heavily dependent on wheels which consume 50% of the world’s oil. Pakistan’s automotive industry is quite proportional in contributing to the global GDP, with around 3% of the total GDP of $297 billion. It also brings millions of lucrative jobs.
The automotive industry represents 4% of the national GDP and employs over 1,800,000 people. There are currently 3,200 automobile manufacturing plants in the country with an expenditure of ₨. 92 billion (870 million USD) manufacturing 1.8 million motorcycles and 200,000 vehicles per year. Its contribution to the public treasury is practically ₨. 50 billion (470 million USD). The sector as a whole employs 3.5 million people and plays a central role in promoting the growth of the supplier industry. The automobile industry was the industry that paid the most taxes a few years ago, followed by the cigarette, tobacco and telecommunications sectors.
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The first car was driven in South Asia in 1897
Until the 1930s, the direct import of cars was limited. They were mainly used by the well-to-do or white-collar cream of the Indian civil service crop. World War II changed the scenario. In 1945, Mahindra began accumulating Willys’ Jeep CJ-3A utility vehicles and soon branched out into manufacturing light utility vehicles and agricultural tractors. Pakistani automobile history can be segmented into several phases. The first phase was from 1947 until the accumulation of trucks (the Bedford “Rocket”), the second, from 1972 until prologue to the private sector and the third was the introduction of tractor manufacturing and motorcycle assembly.
During the fourth phase, the private sector automobile assembly plants were set up and the supplier industry was launched. The last phase covers the era of exports. The first car factory was established in 1949. This factory started on an experimental basis and quickly developed into an assembly plant for Bedford trucks and Vauxhall cars. Ali Automobiles was established with the collaboration of the United States to assemble Ford products in 1955; Haroon Industries to assemble Chrysler’s Dodge cars in 1956 and Kandawalla Industries to assemble American Motor products in 1962. Hyeon established the Mack Trucks plant in 1963. All of these plants were limited to semi-knocked-down (SKD) units and n only had assembly operations. Ghandhara Industries Limited was authorized to undertake the progressive manufacture of Bedford trucks and buses in 1966.
The localization process was not made possible due to technological inefficiency, lack of professionalism and lack of skills. In the post-nationalization period from 1972, the automotive units were renamed and their functions were redefined. The supreme stipulation for the incorporation of the public and private sectors was seized in the 1980s to achieve the national goal of development.
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The need for another car manufacturer arose in the mid-eighties
During this phase, the Industry supplier established its very first assembly plant. The first auto parts manufacturing unit was established in Lahore in 1942 for the purpose of providing after-sales service. From 1950 to 1970, the industry initially focused on tractors, buses, and auto parts, as well as the aftermarket needs of different automobiles. Phase 5 started from 2000 to 2011. The first decade of the new millennium saw the automotive industry in Pakistan grow rapidly and make a substantial contribution to the manufacturing sector.
However, in 2008-09 it experienced a sharp decline, with sales down 47%. During 2009-10, the recovery in sales allowed production to increase from 99,307 units in 2008-09 to 141,654 units. According to the State Bank of Pakistan, the country’s trade deficit increased by 106% to $7.6 billion between July and October 2021. The Trade Development Authority of Pakistan indicated an increase of 579%. Meanwhile, the import of transportation group increased by 140% to $1.5 billion between July and October 2021. The current import of cars observed an increase of 579% owing to the influx of previously reserved vehicles, the accessibility of ships and the influx of shipments. played a central role in the increase in automobile imports. Rising imports from Pakistan put tremendous pressure on the national currency, which closed at 174.89 rupees to the dollar on Tuesday 2022, gaining 0.23% from the previous close.
According to the Automobile Manufacturers Association of Pakistan, the sale of locally assembled passenger cars increased by 71% in the first four months of the current fiscal year, from 43,865 units to 74,952 units. Car sales in October 2021 jumped 45%, from 11,997 units in October 2020 to 17,413 units last month. However, they were down more than 8% on a monthly basis compared to September 2021 statistics. in FY20, 2,427 in FY19 and 3,758 units in FY19. EX18.
In the overall auto imports of about $2 billion, the import bill for fully and semi-knocked down (CKD/SKD) kits for cars, bicycles and heavy vehicles rose to a record 1.6 billion in FY21 compared to $727 million in FY20 while $386 million was spent on importing used and new vehicles in FY21 , up from $219 million in FY20. Over the past two decades, as vehicle use has increased dramatically with increasing population, improved infrastructure, increased mobility of people from place to place for jobs and improved living standards, the demand for automobiles has also increased.
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Pakistan has to depend on importing auto parts from abroad and then the cars are assembled in Pakistan which is not a very efficient way to run the economy of the country. The time has come to manufacture cars and automobiles in Pakistan now. The country has an attractive market for the automotive sector. The new policy, Automotive Industry Development and Export Plan 2021-26, aspires to provide incentives through reduced duties and taxes. Moreover, the policy also aims to pave the way for the manufacture of hybrid cars and electric vehicles. As part of the policy, sales tax was reduced to 12.5% from 17% for cars under 1000cc.
The writer is an English teacher and freelance columnist, based in Lahore, Pakistan. The opinions expressed in this article are those of the author and do not necessarily reflect the editorial policy of Global Village Space.