Time for Pakistan’s local car manufacturers to pull up their socks
Pakistan’s automobile industry is a seller’s market, consisting of two broad categories. On one end of the spectrum, there are the car manufacturers in Pakistan catering to the ‘zero meter only’ customers who need their fix of that new car smell every two to three years, if not more frequently. On the other end are the secondary market dealers selling mostly used cars of all makes, shapes, sizes and conditions. The third option falls somewhere in between this spectrum: the owner-to-new owner transaction.
The workings of the secondary market are complex and the propensity of certain dealers to collude in a particular market means that customers are often at a disadvantage from the outset. Transactions involving a car dealership drawing a commission from both sides (buyer and seller) involves a fair bit of risk-taking on part of the buying party in terms of how the vehicle runs once money is out of the bank. A buyer’s scepticism, albeit completely justified, can make the execution of a transaction take a fair bit of time.
Buying a brand-new car from a dealership is comparatively pretty straightforward. Pay a partial amount upfront to book the vehicle of your choice, wait for an excessive period of time and receive the car after paying the remaining amount. The second you drive that shiny new presumably immaculately manufactured car out of the showroom it starts losing its value because now it is only worth what the secondary market says it is worth, good old demand and supply at work.
But all that is fine, the higher price for the ‘zero meter’, questionable build quality and the wait can be ignored as long as the car runs good, i.e. mechanically it is a hundred percent. Until recently customers rarely had a bad experience in Pakistan in that respect.
Honda’s new 1.5-liter Turbo Honda Civic was all the rage when it was launched late last year. The new ‘Earth Dreams Technology’ that the Japanese auto giant had developed as its new series of engines was the perfect comeback after the epic global failure that was the previous Civic in almost every aspect. Internationally the car was well received with some very positive reviews.
Its launch in Pakistan was quite an event as it was the first factory built turbocharged offered in the country generating close to 170 bhp and 220Nm of torque – making it the nippiest in business among the locally produced cars. Naturally, demand was high and with it, secondary market premiums were – more commonly known as ‘on’ in our market’s nomenclature – as high as Rs400,000 as soon as the first few cars were delivered.
At Rs3 million the 1.5LL turbo Civic is the most expensive Civic ever to be offered in Pakistan and when within months of its launch a plethora of complaints was registered at Honda dealerships countrywide about the recurrent loud knocking noise occurring when accelerating the car, Honda was in a spot of bother. The issue immediately got traction (no pun intended) on social media with rumours of an imminent recall. Subsequently, production of the 1.5LL Turbo variant of the new Civic was halted.
Luckily Honda had an out. Fuel. It so happened that almost all major OMC’s (Oil Marketing Companies), just two months after the launch of the 1.5L Turbo Civic replaced their sporadically available ‘Hi-Octane’ petrol with higher quality fuel after the market was deregulated. This was perhaps why Honda in anticipation of the new, better quality and readily available fuel thought the 1.5L Turbo was ready for the Pakistani market given it required a minimum of RON 91 (Research Octane Number) to run effectively and efficiently without damage to the engine.
When that did not happen, fuel was the first suspect and casualty. Honda has made an official complaint to the OGRA (Oil and Gas Regulatory Authority) claiming that fuel suppliers including local units of Shell and Total as well as Pakistan State Oil (PSO) had added manganese to their gasoline and the additive appeared to be damaging engines in its vehicles.
In reply the representative body of OMC’s the Oil Companies Advisory Council (OCAC) claims that quality parameters are set by the government and all OMC’s operate within them. Furthermore they explained that it was in fact the 1.5L Turbo’s catalytic converter that was not properly calibrated to the fuel in Pakistan nor was the car’s ECU.
There are also credible market reports that Honda will conduct a recall of the 1.5L Turbos to install a ‘chip modification’ on the car’s ECU (engine control unit) or ‘computer’ to regulate the fuel better. This was something they tried previously when the problem first presented itself to no avail, which is when engineers and top management even went to Japan to diagnose and get a solution to the problem. One year on and supposedly they have that solution.
What is more, the fact that of the three major importers/authorised sellers of German cars in Pakistan (Audi, Mercedes and BMW), apart from the occasional knocking due to bad fuel, neither has reported the issue to be as persistent as with the 1.5L Turbo. In fact, their business is booming with Audi in the lead that sells 900 imported units a year and is launching smaller engine size variables to compete with the locally manufactured ‘Big Three’. Simply put the fuel is not the only culprit in Honda’s case.
Hopefully, Honda’s workaround succeeds and fixes the underlying issue with the 1.5L Turbo Civic. But this whole fiasco highlights a much deeper issue – the lack of competition in Pakistan’s car market that makes it almost compulsory for willing buyers to spend ridiculous amounts of money on cars like the Civic, Corolla and Mehran.
Thankfully the new auto policy has allowed, among others, the likes of Hyundai and Volkswagen to set up shop here. Audi is also in talks to open a plant to assemble cars in Pakistan in addition to their imports leading to a 5-10% decrease in prices on their lower-engine models. New entrants are right around the corner and it would augur well for local manufacturers to improve the quality and reliability of their products quickly.