Take to heels for growth on wheels

• Indus Motors CEO clear misconceptions about vehicular import, says non-availability of consumer finance adversely affected industry growth
• Opines auto industry has done well to provide about 2 million jobs, urges govt to facilitate enabling environment for further growth

In an exclusive interview with Pakistan Today, Indus Motor Company Chief Executive Officer (CEO) Parvez Ghias shared his insights into the automobile industry and the upcoming auto policy.

Asked about his expectations from the upcoming auto policy, Ghias said that he was hoping that the new policy will be able to attract credible new manufacturers into the country so that customers enjoy a greater choice of vehicles.

“Equally, the policy must protect the existing OEMs and part suppliers who have invested heavily into localisation; thus creating jobs in thousands and enabling transfer of technology,” he said, adding that the government, for its part, should create the required infrastructure of testing facilities, schemes for technology acquisition, human skills development and limit the used car imports that severely damage the growth of the local industry.

ON LOCAL PROTECTIONISM:

Asked about the gains the local industry had made in the past seven years, given that the 2008’s auto policy had granted it protection from imports, the Indus Motor CEO said that it was important to clear misconceptions about the protection of the local industry from imports.

“New vehicles are freely importable into the country on payment of duty and the level of protection i.e. the difference between CBU and CKD rate of duty available in Pakistan is far below compared to any of the regional countries manufacturing automobiles,” he said, adding that when the first auto policy was announced, the country’s vision was to achieve 500,000 units in sale.

“In response, OEMS and part suppliers responded with major investments in capacity expansions to 275,000 units and new technologies, creating several thousand new jobs in manufacturing and new dealership facilities across the country.

Ironically, global financial crises and several unfortunate national events soon after the launch of AIDP posed innumerable challenges for the industry and the government. The demand for automobiles– which peaked at 250,000 units in 2006/07 and crashed to 110,000 units two years later– is yet to achieve the all time high volume,” he explained.

“Both OEM and parts supplier plants have surplus capacity and despite the above difficulties, the industry has continued to enhance its localisation, including addition of hi-tech parts, which is a noteworthy accomplishment despite the strains of financial leverage and cost cuts,” he underlined.

HAVE THE LOCAL PLAYERS DONE ENOUGH?

During the interview, Parvez Ghias also shed light on the role local players had played, in terms of expansion, job creation and introducing variety, to justify the protection.

“Vehicle manufacturing is a high profile industry that generates enormous revenues, employs millions of people and is often a proxy for a nation’s manufacturing prowess and economic influence. In India 10 per cent of employed population is involved in automotive and allied industries while in Thailand, the auto industry contributes 12 per cent of the GDP. Despite the roller coaster ride of our country’s economy, the auto industry has done well to provide about 2 million jobs, impacting livelihood of nearly 10 million people,” he opined.

WHAT ABOUT AUTO FINANCE?

Asked about the relationship between the rise in costs of auto finance and the local industry’s growth, the industry expert agreed that the rise in interest rates and the non-availability of consumer finance had adversely affected the growth of the auto industry.

“Nearly two third of locally manufactured vehicles sold during 2006 and 2007 were made on auto finance. Now with the macroeconomic indicators stabilising and recent cut in interest rate by State Bank of Pakistan, lowest in past 42 years, we hope that financial institutions will become proactive in offering auto financing facility to customers,” he said.

A WORD OF ADVICE FOR NEW ENTRANTS:

On account of his company being an established player, the Indus Motor CEO was also requested to hand over a few tips for the new entrants in the industry.

“Pakistan is a big market and new entrants will get attracted when we put our house in order. Most factors that apply to new investors entering Pakistan with a long term view, apply to the existing players in the auto sector who have to undertake major investment in retooling with the introduction of new model. Policy makers must capitalise at helping the industry realise its long term potential by creating an enabling environment of consistent policy and good governance,” he said.

WHAT SHOULD WE EXPECT?

Asked about the future plans and what should we expect from the local auto industry in terms of performance and variants, Ghias said, “We are a market of nearly 200 million people, which makes several countries envious. There is no doubt that as our per capita increases, the demand for mobility will rise. Given the right environment, the industry will continue to grow and offer offering choices of styles and technology.”