KARACHI: The Ghandhara Nissan Ltd (GNL) is reviewing its plans to assemble Datsun vehicles in the country as the company feels that under the prevalent volatile economic conditions and exchange rates, it “cannot afford to go for a project of this magnitude especially with that level of uncertainty.”
“Apart from project-related challenges, the local economic conditions particularly the automobile market situation have compelled us to revisit project’s sustainability,” a GNL official said on Friday.
“We have to re-program the project timeline citing unsatisfactory economic conditions, high interest rates and vulnerable exchange rate,” he added.
The GNL had earlier planned to invest Rs6.5 billion in the next four years to launch 1,200cc Datsun Cross by the 2020 and roll out 1,200cc Datsun Go and Datsun Go Plus at the plant located in the Port Qasim area.
The official said that rupee devaluation against the dollar in last one-and-a-half year has changed the financial feasibility of the project while additional customs duty, federal excise duty and high interest rates did rest of the damage.
The market situation is not conducive for new entrants as existing automakers are already facing crisis owing to around 50 per cent fall in sales.
The GNL had also planned to achieve more than 30pc localisation in the first three years of its launch.
The company in a stock filing said that due to a substantial devaluation of rupee against the dollar, localisation of parts has become mandatory to make the project viable. However, the technical evaluation study depicted that localisation of some parts is either not possible or will take significant time and resources due to lack of technology and expertise in local market.
Therefore, Nissan Motor Limited (NML) has been exploring options to get these parts developed at a minimum cost by global vendors for imports as part of completely knocked down kits.
At the same time, GNL is concerned that it has a limited period available to complete all the necessary requirements and start commercial production positively before June 30, 2021 deadline to avail the brown field incentives for the new entrants, the company added.
Nevertheless, the NML and GNL teams have been working day and night to address the above issues and hopefully will be able to overcome these challenges to launch our products within time, as both the partners do not want to miss this incentive opportunity for new entrants.
Ultimately, the GNL will be the biggest sufferer if it cannot meet the target dates as it has been working on this project since the last few years utilising all of its resources including monetary investment as well as work force.
In addition to the progress on car project, the company is keen for capacity building vis-à-vis existing operations to ensure long-term sustainability while addressing challenging macro-economic environment.
Published in Dawn, October 5th, 2019