KARACHI, May 5: There is a gap of 40,000 units between demand and supply of cars in Pakistan currently and the industry is trying hard to bridge the gap by doubling production in order to reduce the waiting period of cars ranging between two to six months in various models. Efforts are under way to cope with the rising demand of cars in Pakistan as the market is set to witness the production levels touching to 150,000 units this year and 200,000 units in 2006 depending on the economic indicators and the policies of the government.

This was stated by the chief executive/managing director of Pak Suzuki Motor Company Limited (PSMCL), Kenichi Ayukawa in a chat with Dawn at the head office located at Pakistan Steel Industrial Estate, Bin Qasim.

He was of the view that the waiting period cannot be reduced overnight. Pak Suzuki and other two Japanese car assemblers are trying to overcome this problem. It will take some time to bridge the demand and supply gap, he added.

To handle the huge demand of cars, he said the company has already invested Rs2 billion for increasing the plant capacity to 80,000 units on double shift basis by January 2005 and in the second phase, the capacity would be raised to 100,000 units by January 2006.

On local development of component through vendors, the company is investing huge amount for in-house development of components of sheet metal and plastic. Besides, meeting the demand through local production, PSMCL has also planned to import completely built up (CBU) vehicles of various engine capacities in the next two months. Only those vehicles are being imported which are not made in Pakistan, he said.

Pak Suzuki is also exporting automobile to various countries. In 2004, the company shipped 64 units to Bangladesh and Nepal as against 36 units in 2003. During 2004, the company also exported parts worth Rs42 million as against Rs21 million in 2003.

As the economic indicators have been showing positive signs, Mr Kenichi seeks long term policy and tariff protection for the auto sector as well as for the vendor industry in order to encourage both vendors and assemblers to make further investment, increase employment and enhance indigenisation. He was optimistic about positive economic indicators in future.

To a query whether Pak Suzuki has approached the Suzuki Maruti of India for importing engines of cars that are also being assembled in Pakistan, he said there is no such plan. However, there is slight possibility of procuring cheaper parts from Maruti but it depends on the government’s decision. Currently, the company has no plans for it.

On opening of free trade between India and Pakistan, PSMCL MD said that Pakistani auto industry will face a difficult situation in case both the country opens their borders for free movement of goods especially cars.

“I see heavy influx of cheaper cars from India,” he said adding that “we need some time to gear up and adjust ourselves for such a situation in future. However, we need government’s support for the protection of domestic car industry whenever this situation occurs.”

He said that India has achieved 90-95 per cent deletion in car segment as against 50-70 per cent in Pakistan. “If suitable conditions are available, our industry will achieve the highest deletion to compete with future challenges,” he said.

TRIMS (Trade Related Investment Measures) has already expired in December 2003. The government has applied to WTO for extension but reports are coming that the Pakistan’s request has been rejected. The government is preparing Tariff Based System (TBS), which would replace deletion programme. The proposed TBS is expected to be implemented from July 2005 as previously it was planned to be implemented in January 2005.

He said that Pak Suzuki is prepared to meet this challenge and expects to achieve the required localisation within the stipulated time.

On entry of cheaper cars in future especially the recent arrival of Chinese assembled cars by a local company, Mr Kenichi said that the company might face some difficulties but a lot depends how new entrants take care of their customers with strong after sales service and parts availability network. Customer satisfaction is the key for any new comer in a competitive market like Pakistan. So far people have trust in Japanese companies because of their strong after sales and parts availability network.

The annual 2004 report of Pak Suzuki linked the demand burst in car segment to improved agriculture output that brought an economic prosperity both in urban and rural areas and had made available disposable income to the society.

The report said that the increased volume of remittances being sent by overseas Pakistanis was also playing a vital role in boosting demand of cars. Banks and leasing companies had extended auto finance to the tune of Rs24 billion in the first six months of 2004-2005.