LAHORE, Jan 6: Auto parts makers are hopeful of doubling their investment in this sector to about Rs140 billion or more in the next two years from the existing Rs70-72 billion.

"The future prospects look great. We expect production of more than 150,000 cars in 2005. Even the year 2004 was not bad for the auto industry despite some policy-related disturbances as the car production went up to around 110,000 units," a former chairman of the PAPAAM, Syed Nabil Hashmi, told this reporter on Thursday.

He said the official announcement to reduce the deletion level to 40 per cent for entrants in this sector sent a wrong signal to the vendors who had invested, or were in the process of investing huge amounts of money for increasing their manufacturing capacity in view of the rising demand for cars in the country.

However the negative impact of the decision was off-set by the robust economic growth, he said, adding: "Otherwise we would have doomed by now." Mr Hashmi said his assessment of doubling of the investment in the auto vending sector was based on the fact that the demand for the new cars was increasing rapidly due to fast economic growth.

He said the demand for cars was likely to climb up to 170,000-175,000 units in 2005 and to 250,000 in another two years or so. "This situation offers good prospects for the vending sector," he said.

According to Mr Hashmi, the investment in the vending industry had increased to Rs70-72 billion in just three years as a result of huge growth in demand for cars in the country. On the other hand, assemblers are said to have made investments of Rs8-10 billion or so to expand their production capacities.

In spite of wide gap of 20,000-25,000 units between the demand and supply of cars and premium being charged on locally assembled automobiles, he opposed the policy of allowing the import of cars to fill the gap. "We need to attract new assemblers, particularly from Europe.

That will benefit all the stakeholders - consumers, government, vendors, etc. - because it'll lead to competition in the industry and bring down prices, generate employment, bring in new technology and increase government's tax revenues."

He said assemblers of imported cars had actually "dumped their cars in Pakistan at unrealistically low prices" to manipulate the market. "It is a fact that buyers have to pay premium even on the imported cars, which defeated the purpose of allowing the import.

What is the use of importing cars if consumers still had to pay a premium? It is high time that the government try to woo a couple of new assemblers in the country." Another leading vendor, who refused to give his name, said the importers had already increased their prices.

"I believe that the increasing yen-rupee parity has forced the importers (of both new and used cars) to enhance the prices in months after launching in the market."

He admitted that the enhanced prices and premium charged on imported cars had dashed the hopes that import of cars would help facilitate low priced cars to land in Pakistan.

He said the strengthening of Japanese currency had also forced local assemblers to increase their prices to stay profitable. He also admitted that import of used cars had actually benefited importers or dealers and not the consumers. "Besides, majority of the used cars imported were high end, expensive models and makes. Common man cannot afford those cars."

The government in the budget 2004-05 drastically cut down duty on the import of CBUs, leaving the local assemblers of cars (800-1300CC) with only 15 per cent duty protection. "But despite this the brand new CBUs imported are much costlier than the comparable local models.

For instance, the Honda basic model in 1300CC is 24 per cent cheaper than the comparable imported brand while Toyota Corollas basic model is 15 per cent cheaper than imported model."

Mr Hashmi said the local government should be allowed to grow. "The government should think of and take long-term decisions. Its short-term policies would prove harmful for this industry.

Let me say, our auto industry has shown maturity, and competed well with imported cars, although the decision kept it quite nervous. If the industry is given support by the government as in the past, it'll contribute more to the economic prosperity of the country," he said.