Pakistani market has huge automobile potential

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Salim Ahmed

Lahore

Pakistan is one of the last remaining large populations to go through rapid growth in Motorization despite projected GDP ranking of 24th in the world. “Pakistan’s economy is shaping up and recent testimonials on the country’s economy by renowned world institutes confirm that Pakistan is the 3rd fastest growing economy,” said Aamir Allawala, former chairman PAAPAM.
Moreover, he added, upcoming investment of $54 billion in the shape of China Pakistan Economic Corridor (CPEC) will have infrastructure development and stimulation of economic growth, while it would increased consumer buying power which in turn would result in growth in auto demand.
“Currently, Pakistan has 16 vehicles per 1000 people and per capita income is $1400, which is leaving it behind against India (18 vehicles), Philippines (30 vehicles), Indonesia (69 vehicles), Thailand (206 vehicles), and Malaysia (361 vehicles),” said Aamir.
He said that the industry has potential but it has long way to go due to lower per capita which is significantly lower than other regional countries. “This is in spite of the fact that three out of top 15 automakers in the world are present in Pakistan and many latest vehicles are expected to come to Pakistan by 2019,” he added.
He said that the local auto industry has the investment of Rs 140 billion with 2.22% contribution to GDP and the contribution of Rs 120 billion to national exchequer. “Pakistan can learn from Indonesia since both the countries have similar factors but Pakistan is way behind in motorization,” he said.
He added that Indonesian automobile industry achieved growth from 379,000 vehicles in 2000 to 1298000 vehicles in 2014 and this growth was triggered by economic stability and young population. “Pakistani auto industry has recovered from the 2010 crisis so it can achieve the same growth in next few years,” he added.
According to Japanese International Cooperation Agency’s estimation of Pakistan auto market potential, approximately 480,000 new vehicles per year could be sold in a country of the scale of Pakistan economy (GDP and population). “But currently not even half of the estimated vehicles are sold every year in the country,” he added.
He said that local market size growth could reach to 500,000 vehicles by 2020 as economies of scale will enable long term investments. “The industry (OEMs and Vendors) are investing in capacity enhancement though it requires long term, predictable policy framework,” he said.
Aamir said that more auto production leads to more localization of parts, more foreign and local investment, employment generation, and more government revenues. “The government’s support through stable policies would help the local auto sector increase its production and increase motorization in the country,” he added.
He said, ‘Auto policy is bearing fruits, new players are eager to enter the market which will not only result in growth of industry but more choices for customers. However, Government needs to be very cautious and ensure continuation of policies to provide predictable environment as we are still paying for deviation from policies in past such as opening used cars import,’ he concluded.