Pakistan Automobile Industry Essay

railway car market is one of the largest sh bes in world trade. In a fast globalized world, this application is facing long challenges like cutting cost, upgrading models, improving burn efficiency and enhancing customers comfort without compromising quality. I categories travel diligence of Pakistan in different phases. In first phase, self-propelled assemblage of Bed ford truck fol funkyed by ford perfect, ford Cortina and Dodge Dart started in 1950s in Pakistan. By the end on the 1970s the compendium of vehicles came to a freeze due to the low quality value of locally produce vehicle sepa browse however continued the assembling of Bed Ford trucks.By the end of 70s practically all assembling ceased in Pakistan. In 1983, second phase of motorcar assembling started with the introduction of Suzuki FX 800 CC car. And with in sextuplet twelvemonths Pak. Suzuki changed the model of FX 800 CC with Mehran 800 CC. Pak. Suzuki there after introduced Khyber 1000 CC and Margalla 1300 CC in 1992. yet in more than ten years, direct of participation in development was not signifi idlert. From 1993, Pak automobile patience moves toward development when Indus motors comp any Ltd. Karachi introduced Toyota Corolla and Honda atlas cars Ltd. , Lahore introduced Honda Civic having 1300 CC engine capacity.Smaller cars also introduced by Indus motors, Pak Suzuki and Deewan Farooq motors in 2000. I. e. Cuore 850 CC, Cultus 1000 CC, Santro hundai 1000 CC. political machinemobile industry in Pakistan bay window be broadly sh atomic number 18d out into following segments Cars & Light Commercial Vehicles. Trucks and Buses. Tractors. Vendor Industry. It is the industry which ope scores under franchises and technical cooperation agreements with Japanese, European and Korean manufacturers. devil and Three Wheelers Public companies that be traded on Pakistani stock exchanges. Automobile assembler Ghandhara Industries Ghandhara Nissan Hinopak Motors Hyundai Mot ors. Indus Motors Company dilute Motors Millat Tractors Pak Suzuki Sigma Motors Volvo Pakistan Limited Al-Ghazi Tractors Atlas Honda Dewan Farooque Motors (BMW Pakistan) Ghani Automobile Industries Pakistan Automobile industry at Present The automobile industry has been strugglers eer since its creation. Although long time has past since its establishment, it has not been able to make a mark among the very stars of the self-propelling world. Although it has tried and made significant advancement towards the production of locally produced vehicles transfer of new engine room has set out a major weakness of the industry.Another reason for the low progress of the industry is due to the steep cost of raise in Pakistan. People acquire made adjustments to their vehicle by changing their fuel preferences from petrol to CNG, just to get by in their lives. The Pakistani industry has so far beingness unable to adopt the GLOBALLY GREEN notion and safety standards. Most cars i n the country depone on dual fuel systems. Moreover Pakistani industry is still relying on car models which have long been stopped producing in other super power countries. Pak Suzuki has gained almost complete monopoly in the segment of producing small cars and faces almost no competition at all.The government policies and regulation of the state bank of Pakistan excessively contribute a great deal of being a wall between the Pakistani automobile industry and its success. By increasing the interest rate on car financing the industry has suffered a huge shift towards downfall. SWOT ANALYSIS Strengths Increasing Demand for Cars In Pakistan context there are 9 cars in 1,000 persons which is one of the lowest in the emerging economies which itself speaks of high potential of growth in the auto sector and more so in the car production.Rising per capita income with changing demographic dispersion and an anticipated influx of 30 to 40 million young people in the economically spry work force in the next few years provides a stimulus to the industry to expand and grow. Resale of local anesthetic Assembled Cars Resale of locally assembled cars is better due to availability of spare part and after sales services and stock warrant Used trade cars have been selling below their cost at the showrooms for the last six months but consumers are not inclined to buy because of their low re-sale value and problems in split availability.Quality of local cars Initially when the import of cars was liberalized the quality of local assembled cars was unsatisfactory so the people of high income level crowd started buying imported cars and the sales of the local assembled cars started decreasing so the local assemblers started enhancing the quality of their vehicles so we can say that the quality of local cars is becoming the strength of the auto industry. OEM The local OEM of Pakistan is well equipped with complete advance technology and skilled labor to produce parts accordin g to the desired quality of any foreign company.CNG kit The advantage of buying local assembled cars is that they comes with factory fitted CNG kits at the times when the prices of fuel emerging at higher(prenominal) pace internationally. Mechanics For local assembled cars mechanics are readily available in market and much cheaper so the buyer has not to worry about any problem that can occur in the car in long term whereas the availability for imported cars is a bigger issue for the owners and if somehow they are able to find one whence the mechanics charges much higher than actually it should be charged. WeaknessWTODeletion program THE World Trade Organization (WTO) has rejected Pakistans request for the extension of the deletion program which enabled it to lay down the condition of the local content requirement (LCR). Under LCR, the automobile and other engineering industry was required to use locally manufactured parts and accessories in terms of governments deletion policy. The condition of the LCR was an aberration to the Clause 5. 2 of the WTO accordance on Trade Related Investment Measures (TRIMs), Article III-National Treatment under the GATT, 1994.WTOs closing for not extending its deletion program / LCR condition has varied impact on Pakistans vendor industry, automobile assemblers, car users and the government. Input Cost In Pakistan as the inflation is increasing so as the remark costs and for manufacturers it is becoming harder to produce at lower cost. Increasing cost of energy and its unreliable and unconformable supply adds up the cost of manufacturing and wastage of resources. It is estimated that by the year 2012, auto industry consumption of electricity forget cross 500 600 MW from around 250 300 MW, as of now.Protection level Before the TBS was introduced the auto industry was well protected by the government but now as the import of CKD and CBU is liberalized the protection level to industry by government is decreased. Lack of s killed manpower for modern machinery In Pakistan conventional machines are not able to meet the precision manufacturing and the available labor is not familiar with modern technology it caused by lack of coordination and linkages with Government/Semi Government Supporting Bodies and Technical Training Institutes.Scarcity of vulgar material especially steel Through previous years the world prices are rising and cause costly inputs and Pakistan has left with scarce Steel and Iron left, so manufacturers are facing difficulties in producing cars with low prices. Opportunities Import German technology and skills EDB wanted to build a Pakistan-German automotive supply network, providing opportunities to Pakistani automotive vendor enterprises to benefit from the German know-how and technology to improve quality, productivity, developing and marketing of value-added products.Foreign Investment and setup production facilities China National Heavy Duty Truck Corporation (CNHDTC), one of t he largest heavy art truck manufacturers in China, has shown interest for investment in the automobile sector of Pakistan. The study is required to overstretch players from Germany as well as from other countries to develop business with the Pakistani counterparts. Baggase Fuel As the fuel prices are rising in world Pakistan should switch to fermentation alcohol Fuel as brazil is using. Ethanol Fuel is produced by Molasses.Pakistan is one of the country which produces good quantity of molasses but the engines of the local cars do not support ethanol so Pakistan should acquire the Technology to produce ethanol compatible cars. In Brazil they use 90% Ethanol and 10% petroleum whereas Pakistani cars with default engines can afford however 3% Ethanol. Global spare part market The annual gross sales turnover of the auto industry, at present, stands at Rs210 billion spot export of auto parts are estimated at $35 million.As such, the increase in production turnover is projected to in crease by 185 per centime while the exports of auto parts would make quantum jump. Threats WTOParts indigenization Smuggling of auto parts The auto industry is for the most part faced by multiplicity of taxes the presumptive tax regime has led to increase in prices of imported inputs and the finished goods. Component manufacturers are struggling to compete with under-invoicing, miss declaration and smuggling. Import of used parts is still continuing at a large scale. Smuggling, under-invoicing and dumping of auto parts.Competition from import cars Auto industry is facing a threat from the import of cars which is already liberalized further it is said that government result cut about 15% of duties till 2011 Fuel prices According to the authorities the fuel prices which currently are Rs 68. 8 and are going to increase by more Rs. 6 by the end of 3-Jun-08. fall tariff structure For localized parts of CKD cars, the tariff would reduce from 50 per cent to 45 per cent in 2008-09 and further to 35 per cent in the next two years. The tariff for CKD non-localized parts would be reduced from 35 per cent to 32.5 per cent in 2007-08 and would keep on decline by 2. 5 per cent every year to 25 per cent in 2010-11. The rate for CBU cars up to 1500cc, the tariff would be reduced from 50 per cent to zero next year (2007-08) and to be kept at that level thereafter. For CBU cars between 1500-1800cc, the current rate of 65 per cent would be reduced at the rate of five per cent annually to 50 per cent by 2010-11. For CBU cars exceeding 1800cc, the applicable rate of 75 per cent would be reduced at the rate of five per cent per annum to 50 per cent in 2010-11.For LCVs, the tariff on CKD kits would be reduced from 20 per cent to 15 per cent at the rate of one per cent every year. However, the tariff for CBU LCVs, the rate would be reduced from 60 per cent to 50 per cent in a phased manner by 2010-11. For two-wheelers, the tariff on CKD kits would be reduced from living 30 per cent to 20 per cent in phased manner to 2010-1. Similarly, the tariff on CBU two wheelers would reduce to 60 per cent by 2010-11 from existing rate of 90 per cent.For localised CKD parts of tractors and heavy mercenary vehicles, the existing tariff of 35 per cent has been proposed to be reduced to 25 per cent in 2010-11. For flowering movers (up to 280 HP) the tariff for CKD would be reduced from 10 per cent to five per cent next year and then kept at that level onwards. Similarly, the tariff for CBUs would be reduced to 25 per cent next year and then kept at that level for the next five years. The tariff for prime movers (above 280HP) and would remain unchanged, while it would be reduced for trucks from 10 to five per cent and from 30 to 25 per cent next year.