KARACHI: The idea that higher localisation of auto parts translates into cheaper vehicles has proven to be unrealistic in Pakistan as motorcycles and cars have become pricier over the years.
In nearly 40 years of local vehicle assembly, falling rupee against the dollar has emerged as a major reason for an increase in auto prices. This gives the impression that no serious effort has been made to use large volumes of locally manufactured parts in vehicle assembly.
The country’s import bill of completely and semi-knocked (CKD/SKD) kits reached an all-time high of $1.7 billion in FY22, up from $1.11bn in FY21 due to low localisation in vehicles introduced by new entrants and in new vehicles offered by existing assemblers.
The Automotive Development Policy 2016-21 attracted new entrants who rolled out different varieties of cars. The industry assembled 279,000 vehicles in Pakistan in FY22.
Speaking to Dawn, Abdul Razzak Gauhar, the chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), said, “localisation in terms of percentage is not authentic.”
“After the transition from the ‘deletion programme’ to the Tariff Based System (TBS) regime in 2006, the annual monitoring of localisation was stopped,” he said. Mr Gauhar claimed that the assemblers’ figures are based on the percentage of the number of parts localised rather than the percentage of localisation in terms of value.
The levels of localisation in the Suzuki Swift, Cultus, WagonR, and Alto660cc are 35pc, 51pc, 60pc, and 62pc, respectively.
The most astounding revelation came from the over three-decade-old Bolan and Ravi models, in which the share of locally made content was 72pc and 68pc, respectively. These two “legendary” Suzuki vehicles had only cosmetic changes rather than a full model change, with the addition of only a Euro-II engine.
The Suzuki Mehran remained on the assembly line for more than 30 years, with only a Euro-II engine change, 70pc localisation, and an outdated interior and exterior design, followed by the 16-year-old Cultus and the 12-year-old Alto 1,000 cc. No successive governments had ever checked Pak Suzuki’s achievements of a different kind.
Speaking to Dawn, an auto parts maker and former Paapam chairman, Mashood Ali Khan, said that the almost four-decade old engineering sector in the automotive industry could not indigenize parts to develop in Pakistan without technical collaboration of foreign partners.
He recalled that from 1990 to 2006, the country witnessed the initiative taken by two Pakistani engineers to develop local passenger cars and pickups but could not succeed in penetrating the market in the absence of government support.
In a recent corporate briefing, Honda Atlas Cars Limited (HACL) revealed that in terms of auto parts, localisation levels for Civic are 60pc, 70pc for City, and 50pc for BR-V.
However, in terms of the absolute amount of Pakistan rupees, the localisation level is around 30pc. The HCAL prefers to use local auto parts as compared to foreign components that meet their quality criteria. The company intends to further increase its localisation levels by using local auto parts given they meet the required quality standards.
Atlas Honda Limited (AHL) has reintroduced a decades-old CDI70cc motorcycle made up of 96pc locally sourced parts.
Published in Dawn, August 16th, 2022
