LAHORE, May 27: Pakistan’s auto industry, which increased its production by 46 per cent in the last 10 months, is projected to make 5,000 more units than the market demand from 2005 onward. Auto and vending industry sources told reporters on Friday that local automakers had increased their capacity to “tackle the problem of gap between demand and supply”.
“The gap between demand and supply will be effectively bridged when the production reaches 160,000 units per annum by the end of 2006 and 200,000 units per year in 2008,” they said. Direct employment in the auto industry is also projected to go up to 190,000 by 2006 from the existing 116,500 as the production expands. Similarly, the investment of Rs52 billion will almost be doubled in the next one year.
“The auto industry, said the sources, “owed its rapid growth to the government’s economic reforms programme. It will further grow once the government’s plans to develop physical infrastructure — roads, bridges, etc., materializes.”
They said only eight out of 1,000 people own a car in Pakistan. “To become a motorized society, Pakistan would have to produce over 500,000 units per annum.” “It shows that Pakistan has a long way to go, and needs to woo tremendous amount of fresh investment in this sector. However, it all hinges on factors like politico-economic stability, sustained policies, improved country perception and higher auto financing,” they said. “There’ve been demands from certain quarters that the government reduce import duties on new and reconditioned cars for narrowing the gap between demand and supply and to bring down prices. This kind of demand is quite misplaced,” they said.
One auto vendor said the reduction in duties in the current fiscal year budget on CBUs had ensued a trend where even the assemblers had begun importing cars and jeeps. “It does not augur well for the vending industry. The assemblers should be motivated to continue to invest in capacity expansion, and bring technology here in the interest of the country’s engineering industry,” he added. The yellow cab scheme and rapid economic changes during 1994-2000 and rapid policy changes had immensely damaged the auto sector and slowed down its growth, he said.
“Any such step in future can reverse the process of growth achieved by this industry. The auto assemblers have made investments to increase their production and to strengthen vending industry to bridge the demand and supply gap. A change in the auto policy will prevent them from investing in the industry in future.”
An executive of a car assembler said car prices could come down if the government reduced taxes on them to provide relief to consumers. He also urged the government to “revise duty on import of auto parts. These steps will allow the industry keep pace with the demand in a growing economy and create more jobs.”
