In the past five years, the sales of locally produced 1300 cc to 2000 cc cars stood at 271, 924 units, which shows a unique phenomenon of affordability of the citizens of a third world poor country, Pakistan.
This is testified in the annual report of Indus Motor Company for the year 2010-11. Pakistan has established itself as a ‘Corolla Loving Nation’ with the highest Corolla sales in Asia in 2010, and, globally, the fourth highest sales in any country.
If we go through the data of the sale of those cars ranging between 1300-2000 cc, it is clear that since 2006 the sales of this segment were highest against other segments, showing a gross reality that the people of our poor country are not really poor. The sale of Corolla was 43, 510 units in 2009-10 and 41, 111 units in the year 2010-11.
The break-up of the sales of this segment is that in 2006-07, total 60,190 units were sold, while in 2007-08 the sales of 50, 824 units were recorded. Similarly in the year 2008-09, the sales of this segment show a little decrease and total 38, 755 units were sold. In the year 2009-10 this segment once again got record sales of 61, 008 units, and this trend stayed intact in the year 2010-11 when total 61, 147 units of this segment were sold.
The manufacturers say that this possibly happens due to increasing remittances, and Chairman IMC, Ali S. Habib in his message in the annual report of the company states that ‘the marginal growth in local auto demand can largely be attributed to buying from record inflows of foreign home remittance and higher agriculture income of the farmers on account of healthy support prices offered by the government.’
But, this reason does not seem sound because in the years when the total auto sales in the country were witnessing substantial growths, the remittances were very low as compared to the current years. So this trend of auto sales in line with increasing remittances works inversely in the country, and this can be gauged by the fact that in the year 2008-09 remittances started showing plausible growth (Jun’08 $57m and Jun’09 $716m), but the auto sales of that year were a record low and had a 47 per cent decrease from the preceding year.
Yet, the poor nation achieved a milestone in buying quite expensive cars and this trend is still going on, while the segment of 800cc cars, which falls in the category of small car segments according to the affordability, tried to catch up whose total sales in the five years stood at 240, 915 units, with highest selling 65, 349 units in the year 2006-07.
The small segment is naturally in the buying power of that segment of the society which survives on remittances and agricultural income, but by the time when remittances figure touched the highest numbers in the current years, the sales of the small segment drastically lowered. So what this shows with the increasing number of high segment sales is that either the buying power of the above mentioned segment of the society has improved or just the elite segment of the society has got more space.
A segment of 1000cc cars has the sale of total 167, 390 units in the past five years, while LCV vehicles witnessed the sale of 98, 856 units in the said period. Chairman IMC expects that ‘banks that had earlier shied away from lending will gradually enhance their portfolio of auto financing and specially look at the LCV sector as a new segment for growth.’
Suspension of Cuore’s production
In this time of rising inflationary pressures and higher fuel prices, which is making the customer switch to economical means of transportation, IMC came up with a surprising decision to suspend the production of Daihatsu Cuore due to a prohibitively high manufacturing cost and poor profitability. It is to be noted that Cuore witnessed 8% increase in its sales against the total production of 5, 301 units in the year 2009-10 with the production of 6, 007units in the year 2010-11.
Chairman IMC further stated in the report that ‘later in this year, we plan to discontinue the production of Daihatsu Cuore [by dint of above mentioned reasons], we are examining alternate products and these will be announced at the appropriate time.’ It is pertinent to mention that IMC in total has produced 379, 313 units of all the mentioned segments in the last ten years from the year 2002 till 2011.
Do Pakistanis have any other options? Only three car makers are working here so they have two others to pick from. Govt should invite other international car makers to set up manufacturing plants here. If Corolla, Honda and Suzuki can work here, despite security concerns and rest of the stuff, and earn handsome amount of money from Pakistan, then there should not be any problem for the rest of the car manufacturing giants
At some point, there would be discussions about "crowded market" and "economies of scale". "Market size", "growth potential", "regulatory environment", "resource limitation" and "country risk" are the important factors which would either motivate or dissuade the local manufacturing. Alternative to such constrain (in broadening consumer choices) would be (import under) free trade (environment).
Well there is BMW, Mercedez, Cheverlot, Adam motors, KIA, Dawoo here as well.
Adam: Died 6 months after it launched.
KIA: Dead.
Daewoo: Except for the taxi scheme, it was a dead child birth.
Chevrolet: Too lazy or rather afraid to invest in a good marketing plan therefore its considered dead by most.
Mercedes and BMW: You got to be kidding me.
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