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New players enter car market

September 18, 2005


KARACHI, Sept 17: The Pakistani car market, dominated by Japanese car assemblers, is now undergoing changes, as some more local businessmen have ventured into the car assembly in collaboration with China to carve a niche in the overheated car market.

Car leasing and bank financing have changed the parameters of the car market in recent years. The demand has outstripped supplies by a vast margin. To cope with the situation, the government has liberalized car imports (used and new) in the last one year. Perhaps, the new players sensed the potential in the market and decided to cash their luck by rolling out cheaper cars.

It is to be seen how far these new entrants will shake up the domination of the old players. Will they be able to match the quality of Japanese brands at such low prices? What are their market strategies to lure prospective buyers who now appear to own a new car at any cost?

Consumers have seen the entry of cheap Chinese assembled and imported Chinese bikes in the last two years. Their popularity can be witnessed on the roads as they now run side by side with Japanese assembled bikes. Because of cheap price factor, the end-users are more interested in buying a Chinese bike despite knowing the fact that they are compromising on the quality. Will the episode be repeated in case of cars?

A local company — Transmission Motor Company Private Limited — is a wholly subsidiary of Transmission Engineering Industries Limited (TEIL), listed company in Karachi and Lahore Stock Exchanges, has introduced a cheaper cars to bridge the gap between motorcycle and 800cc car.

TEIL has invested Rs40 million in TMC which has technical collaboration with Chinese companies (vehicle and main assemblies’ manufacturers). Many variants of local car, being produced in Pakistan, are also available in China. However, TMC Alif car, Bay pickup and Bay delivery van have been modified and improved according to the local needs, roads and weather conditions.

With 200cc four stroke water cooled engine, these versions can run 25 km in a litre. If CNG is fitted - it gives 70 paisa per km.

Chief Executive Officer of TMC, Fasih Hussain Agha told Dawn that the company has created a new segment between a bike and an 800cc car. Bike lovers can now a good option to have a cheaper car.

He said the cab is cost effective than rickshaws. The government aims to phase out two stroke vehicles gradually and thus encouraging alternative vehicles running on CNG as a replacement.

To a query whether the low engine power can handle the load of four passengers, he said the vehicle has undergone endurance test running 20,000 km on Karachi roads with rated payload of 300 kg or four persons. The vehicle has a top speed of 75 km/h and the engine has adequate torque to climb mountains, he claimed.

Despite intense competition with Japanese car makers as well as imported cars, Fasih said, “our vehicles have created a new market segment. It is actually not competing with any existing cars.”

At the start, the deletion level is 67 per cent, which would be increased to 90 per cent in five years, ensuring locally available spare parts, he said.

The plant has installed capacity of 5,000 vehicles per annum on eight-hour single shift basis. The CEO claimed that the company has booked export orders to six countries from Asia, Africa and South America.

Another local player has claimed to have launched first national car called Revo a month back

The chairman and chief executive of Adam Motors, Feroz Khan claims that with its car production, Pakistan has really earned a distinction of joining the exclusive club of 15 of such car manufacturing countries.

On an assumption that Revo is a Chinese assembled car, he says that “engine and transmission is the only sub assemblies imported from China. The starting deletion level in the car is 67.5 per cent and it will reach to 90 per cent plus by December 2007,” he added.

On technology transfer, he said his company has designed this car from basic styling to completion. This is a factual position.

He said the car has longer wheel base, wider in tread width, bigger in trunk space than immediate competitors. All the tooling, jigs and fixtures are brand new.

The price of Revo is tagged at Rs269,000 (Rs44,000 lesser than Mehran) while 1,050cc car is priced at Rs434,000 compared to Santro’s price of Rs600,000. However, Revo price is slightly lower than Alto and Cultus but the main difference is the electronic fuel injection technology which the new entrant offers as against Suzuki in the same category of engine capacity.

He claimed that if the taxes and duties, paid to the government, which come close to Rs69,000, then the car is actually priced at Rs 200,000.

The car is being built at an assembly plant where heavy investment has been made in jigs, fixtures, moulds and dyes. The company has created approximately 1,000 new jobs. It has 70 vending companies supplying parts, he said.

The installed capacity of the plant was 15,000 cars per year. However, the company would produce 5,000 cars per annum, Feroz said.

On the quality of car, he said that he had launched the product after an extensive research and development of five years. The car has been tested over 16,000 kms and consultants, that have tested German cars, have also tested this car.

Another player in the local market Pakistan Cherry Automobile (pvt) Limited is coming up next year in local production of CherryQQ cars in collaboration with Chinese partners.

Initially, the company is bringing up completely built up (CBU) units in Pakistan. The first batch of cars will arrive in the first week of October 2005.

Director Operations, Pakistan Cherry Automobile, Asad Wahid said the company would introduce the entire line of Cherry automobiles in Pakistan which include the 1600cc executive sedan named the Flag Cloud, the 1900 cc diesel luxury Saloon codenamed A-21 and the 2400 cc 4x4 high performance SUV named the ‘Tiggo’ which stands for ‘TIGER’ when translated into English.

He said initially eight cars as sample had already arrived in Pakistan. These vehicles had been extensively and exhaustively tested under the most severe and harsh conditions of Pakistan and had been driven up to the Punjab border from Karachi in simmering 40+ degree climatic conditions. The Chery ‘QQ’ is priced at Rs 489,000.

He anticipated that work on the assembly plant would start by the end of 2006 at Port Qasim, thus bringing foreign investment of $40 million on a joint venture basis between the two companies. This would be the first joint venture project of this magnitude in Pakistan between Pakistan and China in the passenger automobile sector.

He said that this project would create direct employment for up to 5,000 people besides creating indirect jobs for many people and families with the setting up of vending industry, dealership network, etc.

Asad said as soon as the Chery CKD plant would become operational, the company would move aggressively towards capturing the potentially lucrative markets of Afghanistan and the Central Asian Republics.