Uncertainty hits Datsun car project

Updated 24 Jan 2020

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The GNL had earlier planned to invest Rs6.5 billion in the next four years to launch 1,200cc Datsun Cross by 2020. — AFP/File
The GNL had earlier planned to invest Rs6.5 billion in the next four years to launch 1,200cc Datsun Cross by 2020. — AFP/File

KARACHI: The future of Datsun car project hangs in the balance as Ghandhara Nissan Ltd (GNL) has not received any road map from Nissan Motor Company Ltd (NMCL) regarding localisation of parts.

In the project progress report filed to the Pakistan Stock Exchange (PSX) on Thursday, GNL said the company together with NMCL has invested a lot of time and resources to ensure optimum level of localisation in an efficient and effective manner.

However, as part of NMCL’s recent business strategy and particularly the management policy changed with respect to Datsun segment. It is critical to note that Indonesia, which is the mother plant for Datsun completely knocked down (CKD) kits, may not be a sustainable source, the company said.

GNL added, "Though we still await NMCL’s assurance/confirmation on the continued and smooth supply of Datsun parts, yet it is high time to put on hold the ongoing project activities before getting a clear road map from NMCL."

Till NMCL takes a final decision on this project, GNL has to wait for a final verdict on the viability.

Cognisant to the incentives of the brownfield status, GNL is also exploring other avenues in parallel on capacity building of existing operations, the company informed the PSX.

In October 2,019, GNL said it was reviewing its plans to assemble Datsun vehicles in the country as it felt 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 the project’s sustainability," a GNL official said, adding that the company had to re-programme the project timeline citing unsatisfactory economic conditions, high interest rates and vulnerable exchange rate.

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 company also planned to achieve more than 30pc localisation in the first three years of its launch.

The company, in a stock filing in October 2019, had said that localisation of some parts was either not possible or would take significant time and resources due to lack of technology and expertise in local market.

NMCL had been exploring options to get these parts developed at a minimum cost by global vendors for imports as part of CKD kits.

GNL had a limited period available to complete all the necessary requirements and start commercial production positively before June 30, 2021 deadline to avail brownfield incentives for the new entrants.

Pakistan has recorded over one billion dollar of investment from the new entrants in greenfield and brownfield categories under the Auto Development Policy 2016-21. However, these entrants have been trying hard to survive in a tough business environment when existing car assemblers had already faced 32-72 per cent sales decline during IHFY20 due to imposition of federal excise duty (FED) of 2.5-7.5pc on different engine power, additional customs duty on imports of raw material, high interest rates and massive price jumps.

Under Category A, some 18 investors have been granted greenfield status from 2016 to date while two closed down units have been revived under brownfield status. Regal Automobiles, United Motors, Master Motors, JW Foreland, Kia Lucky Motors and Hyundai Nishat Motors have already started production of cars and SUVs.

With no future possibility of Ghandhara Nissan Datsun project, the fate of another project called Al Futtaim Renualt is also unclear.

Published in Dawn, January 24th, 2020