Islamabad: Pakistan’s attracting new investors in the auto sector such as Renault-Nissan with a lot of duties however it’ll be challenging to convince them to found factories because of security matters. The government intends to be more independent from the Japanese domination in the market since Toyota, Honda and Suzuki are locally assembled and sold at a very high price for a lower quality. The government should persuade the manufacturers that the country has made a long way over the hard decade of militant Taliban attacks.
Pak Suzuki irked by new auto policy, calls it ‘disaster’ for existing players
The economic situation of the country is more stable in the last few years and could be a good investment market with about 200 million people and currency stabling against dollar. Officials are attempting to sell a new auto policy for the new entrants by offering lower duties as a motivation to set up plants in Pakistan. Miftah Ismail, the chairman of Board of Investment is expecting one or two foreign investors into the country, he has told Reuters he talked to Japan’s Nissan and alliance partner Renault, Fiat executives in Italy and Germany’s Volkswagen.
A Renault source declared that the government is considering a new production investment but no official announce has been made as Jonathan Adashek, Nissan chief spokesman has said too.
Stability:
Analysts think the chances to finalize the deals are small for the government because of the major obstacle which is the political stability and the threat of Taliban attacks.
Automotive policy: exclusive incentives for new players blocked
Foreign companies are hesitating to invest big amounts of money when the large long term perspective is uncertain. Puneet Gupta, the associate director at consultant HIS Automotive said: “there is no doubt of the potential in Pakistan but we really don’t feel that is in a stable condition for a long term outlook”. The size of the country’s car market is about 180.000 sold cars in the 2014/2015 fiscal year comparing with over 2 million passenger vehicles a year in India which can be a turn off for investors and as Mumshad Ali, chairman of the Pakistan Association of Automotive Parts said “the Pakistan market is not big enough”. He also thinks the new government’s policies aren’t that interesting for new manufacturers with no ways to increase demands and the local manufacturing partners of Toyota and Honda did not respond to requests.
Ali said the existing manufacturers aren’t happy that the government favors new investors, they think they should be equally encouraged. On Friday Suzuki said it would invest 460 million dollars in Pakistan by setting up new plants if the right motivations were provided.
Ismail said new investors would be able to import machinery duty free; it has been set at 10% while existing manufacturers will have to pay 30%. He said they want greater competition so consumers will have better choices, because some of them are frustrated to pays high prices for average quality for locally assembled cars that generally do not have airbags, anti-lock breaking system (ABS) and other standard features. Suzuki Mehran is the cheapest car is sold at 650.000RS (6.200$) or about double of a similar model in India.

F.Z Maghelli

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