Automotive Industry in Pakistan

Automotive industry in Pakistan started in 1950 and has gone through different phases1950’s
(Private sector).1960’s (Private sector). 1970’s (Nationalization). 1980’s onward (Privatization &
entry of private sector).
Segment wise Automobile Manufacturing Units
Cars 7 L.C.Vs 7 Jeeps 2 Truck and Bus 5 Tractor 4 Motor cycle 42
Vendors (400 approx)
Industry operates under franchise and technical cooperation agreement with:
Japan Europe Korea China
The automobile sector has been registering high growth for the last four or five years due to the
country's business friendly policies along with lower tariff rates, persistent growth in GDP, and
per capita income.
Globally considered as the mother of all industries, the auto industry in Pakistan is fast evolving
as a robust industry. Some sub-sectors of this fast growing industry, like motorcycle production,
have already achieved economies of scale.
The level of motorisation has also been gradually rising over the years. In 1998-99, it was three
cars per 1000 persons, which has significantly increased to 11 cars per 1000 persons in 2005-06.
The indigenous production of motorcycles increased by 25 per cent during 2005-06, reaching to
an all-time high of 520,124 as compared to 106,797 units in 1996-97, which accounts for around
380 per cent increase in motorcycle production during the last nine years.
The production of trucks as well as that of buses has also posted sufficient increase during the
last 10 years. Some 2,994 units of trucks were being produced in the country in 1995-96 which,
over the years, have increased to 4,518 units, showing a rise of 51 per cent. In the case of buses,
the rise in production is more pronounced as compared to that of trucks as their production
augmented by around 74 per cent during the last decade or so.
It may be mentioned that Central Board of Revenue (CBR) has suggested levying 6% withholding
tax on purchase of new cars with an objective to broaden the tax net. However, the imposition
of withholding tax on purchase of new cars is not likely as this will ultimately increase the prices
and encourage imports of cars.
The industry however is likely to have a neutral impact on the automobile sector.
Implementation of Tariff Based System (TBS) and auto industry investment policy are few of the
measures that are expected in the upcoming budget.
The industry has achieved a phenomenal growth of 50.2 percent in FY04 and increased
competition has led to the introduction of innovative products as well as a decline in financing
costs. Compared with Pakistan, India has a strong engineering base and has successfully created
a sizable capacity for production of vehicles. It enjoys a clear edge over Pakistan in the
automobile sector. Indian auto companies are highly cost competitive due to appropriate levels
of automation and low cost automation and have achieved a high level of productivity by
embracing Japanese concepts and best practices. India is already the second largest two
wheeler manufacturer, second largest tractor manufacturer, and fifth largest commercial vehicle
manufacturer in the world and has the fourth largest car market in Asia. The automobile
industry in India is now gradually evolving to replicate those of developed countries. Pakistan
can import automotive components and spare parts from India at a lower price as presently
these items are being imported from the Far East at higher prices. On the other hand, India is
expected to benefit from free trade due to its low raw material, electric and labor costs.
Introduction
The automotive industry rightly prides itself on being recognized as the “mother of all
industries.” In its folds it carries many different kinds of vehicles to provide mobility to people
and goods. While they may appear to be simple machines, their design and manufacturing have
much deeper roots in all the known technologies. In-depth knowledge and skillful application of
mechanical, electrical, electronics, chemical and a host of other technologies culminate in
achievement and improvement of the manufacturing base of a country, by focusing on a single
product the automobile. This then provides an opportunity to produce a large number of goods
and services for consumption of the entire international community. Use of the word “mother”
for automotive industry is therefore the most appropriate description to define the nature and
importance of the industry.
In recent years, we have witnessed that the industrialization of South East Asian countries
greatly depend on the development of their automotive industry. Similarly, automotive industry
acted as a catalyst in the overall growth of the industry in Japan and Korea and the consequent
well being of their citizens.
It is indeed heartening that the mother has once again smiled at Pakistan. Fortunately the last 3
years have witnessed phenomenal growth in the industry in terms of technological
advancements and production/sales volumes with the local contents rising as high as 90%. The
industry is already employing 120,000 people, contributing more than 12 billion rupees to GDP,
contributing more than Rs. 30 billion to the national exchequer in terms of duties and taxes,
attracted investment worth Rs. 52 billion including a substantial foreign investment. Today the
customers have choice to pick from a wide range of products including motorcycles, trucks,
buses and cars of premier Japanese and Korean brands at internationally competitive prices
which has only become possible due to local contents and availability of highly productive and
inexpensive human resources.
An automobile has over 2000 components and parts out of which the assemblers usually
concentrate on the manufacturing of small but critical parts while the remaining parts are
supplied by the vendors and the subcontractors.
In Pakistan the automobile components manufacturing industry consists of mainly units

producing original components for assembly under deletion program and units producing
reconditioned and original components for local use.
These units are in three types which include the original equipment manufacturers,
independent manufacturers and the ancillary industry producing small parts and non-
automotive items.
There are more than 800 vendors in the country with a total investment of over eight billion
rupees; they are engaged in the manufacturing of original components for the assembly
operation under the deletion program as well as producing reconditioned and original
components for sale in the local market.
They manufacture and supply the local car assemblers with auto parts such as pistons, engine
valves, gaskets, camshafts, shock-absorbers, struts, steering mechanism, cylinder head, wheel
hubs, brake drums, wheels, bumpers, instruments and instrument panels, gears of all types,
radiators, cylinder liners, blinkers, lights, doors and door locks as well as auto air conditioners.
Critics said that the local vendor industry though still in the process of development could not
achieve the deletion targets by producing low quality components which are not acceptable by
the local assemblers, it is said that the Pakistan Association of Automotive Parts & Accessories
which represents the auto parts manufacturers have not in a way been fully able to contribute
its share to the development of the sector.The vendors on their part however put the blame on
the policy makers and partly on the assemblers who have not been encouraging the local
vendors as such.
On the other hand it is said that the foreign car principals have no justification for their
complaints because of the level of their participation in the local vendor industry. Hino trucks it
was pointed out have started manufacturing wheel drums locally while Suzuki is still
complaining about the quality of silencer it received from the local vendors.
In the world trade, Auto Sector is one of the largest segments. It is the major driver of economic
growth and business activities. It puts multiplier impacts on the economy. Day-in, day-out
around 200,000 vehicles roll off the world’s assembly lines with car as the dominant segment of
the industry.
Evolution of Automobile Industry in Pakistan
Automotive industry in Pakistan started in 1950 and has gone through different phases of
progress as summarized below:-
PERIOD MANUFACTURING OPERATIONS VEHICLES COMPANY
1950’s
(Private sector).
SKD Assembly. Bedford trucks/buses. General Motors.
1960’s
(Private sector).
SKD/CKD Assembly
Indigenization in :- i) Bedford trucks /
buses - 40% approx.
ii) Cars - 20%.

Bedford trucks/buses, Ford Combi vans,
Vauxhall, Ford Prefect, Ford Cortina and Dodge Dart cars.

Gandhara Industries Ltd. (formerly General Motors).
1970’s
(Nationalization).
SKD/CKD Assembly
Indigenization process accelerated and achieved 80% deletion in Bedford trucks/buses by 1976.
Bedford Trucks/ Buses, cars (upto 1972). PACO
1980’s onward
(Privatization & entry of private sector).

Progressive manufacturing of cars under Deletion Programme. Suzuki, Toyota, Honda, Hyundai,
Santro, Kia, Cuore, Revo and Chevrolet cars. PACO, Pak Suzuki Motors, Indus Motors, Honda
Atlas Cars and Dewan Farooq Motors, Adam Motors, Nexus Auto
Segment wise Automobile Manufacturing Units
• Cars 7
• L.C.Vs 7
• Jeeps 2
• Truck and Bus 5
• Tractor 4
• Motor cycle 42
• Vendors (400 approx)
Operational Environment
Industry operates under franchise and technical cooperation agreement with:
§ Japan
§ Europe
§ Korea
§ China
Production
Your browser may not support display of this image.
Source: PAMA
The two segments of the industry namely; car and two wheelers have shown remarkable growth
over the last five years. The growth in domestic market of cars has risen from 40,601 in 2001-02
to 126,817 in 2004-05, which is expected to cross 150,000 units during 2005-06. This growth is
attributed mainly by car financing schemes, improved liquidity position of certain class as a
result of economic growth indicators and other monetary measures.
The motorcycles have also shown marvellous growth due to new entrants. The new entrants
with fair competition have brought about the availability of cheaper vehicles in the domestic
market.
Vendor Industry
The industry has the potential for development of entire engineering sector. Development of
vendor industries in return assures transfer of technologies in nearly all spheres of engineering,
specifically, metallurgy, plastics and glass.
Technology exists for major engine, suspension and transmission components but due to limited
market, prospective entrepreneurs shy away from investment. Over 400 vendors are engaged in
the production of auto parts locally including tyres, sheet metal parts, mirrors, gaskets, engine
valve, camshaft, oil pump gears, pistons, radiators, seats, dashboard, and axles.
The Beginning of the Pakistan Automobile Industry
Pakistan is basically an agrarian economy since its independence. In 1947, agriculture

contributed more than 62% towards GDP whereas contribution of manufacturing sector toward
GDP was only 7%. Pakistan inherited only 5% of the large scale industrial facilities of British
India. At that time Pakistan hardly had any industrial base and was without any institutional,
financial or energy resources. Besides, basic infrastructural facilities, technical skill and other
pre-requisites for development were also lacking. There were neither any automobile assembly
plants nor were any industrial capabilities available for this sector. However, the development of
this industrial sector started soon after the independence. Peace in the country and
development planning by government resulted in increased economic growth that sequentially
laid the foundation of industry.
First serious effort by government to develop the industry and engineering sector in particularly
was observed in 1950 when a six-year plan (First Development Plan) was drafted to guide
government investment in developing the infrastructure. For auto industry, to overcome the
initial difficulties, the government, besides developing infrastructural facilities established the
Pakistan Industrial Development Corporation (PIDC) in 1950. The main objective of PIDC was to
play the pioneering role of establishing such industries which the private enterprise was unable
to undertake either because they were technologically complex, needed large capital or were
less profitable. These steps results in growth of the industrial sector resulting 56.62 % growth of
the manufacturing sector from 1949-1955.
Investment in the automobile industry in Pakistan started in the mid-50's when Kandawalla
Industries established its units for assembling buses and trucks, the company's name was later
changed to Naya Daur Motors.
National Motors took the indigenization when it came out in the 60's and was said to have
reached above 80% deletion of the Bedford lorries and trucks before it closed down.
Kandawalla Motors on its part came up with 'Nishan' , a jeep copied on the pattern of Willeys
Jeep of USA by the Pakistan Army, it was said that the project was successful but was killed
before the commercial production could begin. It may worth mentioning here that the same
blueprint is said to still be in use in Iran till today but under their own brand name.
Second Period 1964-72
Period of Progressive Manufacturing
Potentials of industry and high demand of the products attracted new entrants whereas the
existing players started producing in mass quantities. This mass production that started in 1964
resulted in the first ever period of progressive manufacturing in the history of Pakistan. The idea
of progressive manufacturing was first mooted by the Ghandhara Industries and Mack Trucks.
The idea was to start local manufacturing with simple and non-functional parts and to add more
and more complicated parts in small steps. According to the planning then done 100% local
manufacturing was to be achieved in seven to ten years. Unfortunately, this period does not last
long as the projects undertaken proved to be over ambitious that eventually fail.
Clearly the concept of progressive manufacturing has not added much to technology, self-
reliance or economy. For example, as against the targets set of manufacturing 100% of local
contents in maximum 10 years actually achieved deletion in eighteen years is 45.78% for trucks
& buses, 43.17% for trucks & buses engines, 16.50% for 4x4 jeeps and zero percent for cars.
Furthermore, no new units for manufacturing passenger cars, 4x4 vehicles, LCVs, buses and
trucks were established under this concept, but still few new units for producing tractors, jeeps
and specialized vehicle were established. New units established were Atlas Honda, Khawaja
Autos, Rana Tractors, Jaffar Industries, and Bela Engineers. A more market oriented approached
was observed by Honda motorcycles and Vespa scooters during this period, as they introduced
light motorcycles for the first time in a market dominated by heavy motor bikes like BSA,
Triumph and Lamberetta scooters.
Third Period 1973-87
Nationalization of Industries
Following the progressive manufacturing period, nationalization of industries under Economic

Reforms order had a profound impact on automobile industry in Pakistan. In early 1972 under
Martial Law Regulation, the Government took over the control of 32 industrial units, including
eight automobile plants, under the officially appointed Board of Industrial Management with the
Minister for Production as its Chairman. Out of the units taken over by the Government were
included iron and steel, heavy engineering, heavy chemicals, assembly and manufacturers of
motor vehicles.
TABLE 1: NATIONALIZED UNITS
ASSEMBLER RENAMED ASSEMBLER RENAMED
Wazir Ali Engg. Sind Engg. Hyesons Mack Trucks
Ali Autos Awami Autos Rana Tractors Millat Tractors
Haroon Ind/Karachi Auto Republic Motors Jaffer Trailer Devp
Ghandhara National Motors Ghandhara National Motors
Kandawala Ind. Naya Daur Ali Autos Awami Autos
Initially, the management of these industries was taken over by the government, but in August
1973, the President promulgated the Economic Reforms (Amendment) Ordinance after which
the Federal Government acquired majority ownership of shares of these industrial units. After
nationalization, these units were renamed (see table 2), their functions were redefined and
Pakistan Automobile Corporation (PACO) was created in 1973 as a holding corporation under
the administrative control of the Federal Ministry of Production.
FORMATION OF PACO
In order to manage the automobile units and to advise the Government (in developing policy
guidelines for growth and development of auto industry), Pakistan Automobile Corporation
(PACO) was formed in 1973 under the administrative control of the Federal Ministry of
Production. It was a major public industrial conglomerate of 15 companies including four joint
ventures. For the first time in Pakistan emphasis was given to develop the nationalized units
under took local manufacturing facilities and the development of parts in an organized manner
and the system of standardization, regulations and monitoring was established. This requires
the industry to assemble from Complete Knock Down (CKD) and then go on to manufacture
components and to achieve a local content of 75% over a five year period. A number of small
and large industrial units that were mostly functioning in the unorganized sector were
channelised into a more formal pattern of production management under the PACO control. The
direction for achieving quality standards as laid down by the "Principals" was also established.
The MOI was entrusted the responsibility of allowing any waiver for non-performance, and was
applicable if CBR also concurred.
PERFORMANCE UNDER GOVERNMENT CONTROL
According to the government resources, the nationalized industries made progress on a wide
front. In 1973-74, large scale manufacturing sector achieved a growth rate of 7% as compared to
11.8% achieved in 1972-73. The performance of automobile and farm equipment group was the
best with production recording an increase of 78.6%, followed by chemicals (30%) and steel and
engineering (15.1%).
It can be observed that number of units in almost all areas of automobiles developed in this
phase. The distinctive feature of after nationalization period is the assembly of Suzuki range of
vehicles (Cars, P/up, Vans & Jeeps) and Isuzu Trucks & Buses in the public sector. Awami Autos
signed a Joint Venture Agreement with Suzuki Motor Co. of Japan and a new company by the
Name of Pak Suzuki Motor Co. Ltd was established in 1982 to produce Suzuki range of vehicles
at the existing facilities of Awami Autos. PACO also established two units in the public sector
namely Baluchistan Wheels and Bolan castings.
The performance of PIDC was also excellent under the nationalization reform and it also
contributed towards the progressive manufacturing. The performance of PIDC can be evaluated
from the fact that by the end of December 1973, PIDC was successful in completing 62 projects
at a capital cost of Rs 1,242.6 million.
In March 1974, 16 industrial projects were transferred to the respective 12 corporations set up
by the Federal Government. Including in these projects were Pakistan Machine Tool Factory,
Heavy Mechanical Complex and Heavy Foundry and Forge Projects. Subsequently, the remaining
10 projects under the PIDC’s control were also transferred to the Mineral Development
Corporation. During 1972-73, the PIDC- managed projects and companies produce goods worth
Rs. 470.5 million as against Rs. 446.6 million in 1971-72.
Fourth Period 1987-95
Privatization of Industries
The policy of de-nationalizing public sector units was adopted once the change in government
took place. Privatization brings in foreign companies. This results in a number of joint ventures.
Due to these ventures, Pakistan auto industry enters into assembly/progressive manufacture of
passenger cars, commercial vehicles and motorcycles. Once the new management of cars and
motorcycle assemblers took over the control they entered into joint ventures with foreign
companies mostly Japanese, for further development. Most important joint venture that took
place was of Atlas with Honda and Indus Motor with Toyota.
Similarly, Naya Daur which after discontinuation of AMC-Jeep franchise had, become a mere
vendor to Pak Suzuki (assembling Suzuki Jeeps) was sold to Tawakal group. Under the
Government de-nationalization policy Naya Daur entered into Joint Venture with Kia Motors of
Korea and started assembling Kia Ceres Pickups and Kia Pride Cars.
The process of privatization is still on and fortunately every government has adopted the policy
of privatization and opening of the markets for foreign investors. Although, process is on but still
many object that this process is not crystal clear and has many short comings
NEW MANAGEMENT
Indus Motor Co Toyota/Habib Pak Suzuki Motors Co. Suzuki Motors Japan
Honda Atlas Honda/Sharazi Naya Daur Motors Tawakal Group
Analysis Of The Automobile Industry
The automobile sector has been registering high growth for the last four or five years due to the
country's business friendly policies along with lower tariff rates, persistent growth in GDP, and
per capita income.
Globally considered as the mother of all industries, the auto industry in Pakistan is fast evolving
as a robust industry. Some sub-sectors of this fast growing industry, like motorcycle production,
have already achieved economies of scale.
The tremendous rise in automobile production has resulted from increased domestic demand,
giving a healthy impetus to the industrial output and generating over 150,000 direct
employment opportunities besides contributing substantially in duties and tax revenues to the
national exchequer.
Since 2001-02, the automobile market has grown by over 40 per cent per annum and if an
average growth of 30 per cent is maintained during the coming years, the country's auto market
will cross the milestone of 500,000 units by the year 2010.
During the financial year 2005-06, the sale of locally assembly cars posted an impressive growth
of 22 per cent, rising to 155,514 units as against 127,309 units during the previous year.
To ease the pressure on rising demand and to curb the evolving culture of premium on the
factory price, some 40,000 vehicles were also imported during the said period.
Pakistan has made its debut in the vehicle export market by exporting its first batch of Land
Rover Defenders to Sri Lanka. M/s Sigma Motors - the sole distributor and assembler of Land
Rovers in the country - holds the distinction of being the first exporter of these diesel engine
vehicles.
Since starting assembly operations in May 2002, Sigma motors have assembled over 3,000 Land
Rover Defenders, which are in use all over the country. Now, the company is geared to assemble
2,000 vehicles per annum. In addition to looking after the needs of fleet customers, the
company is also pursuing export opportunities in the regional countries.
Being an icon of automobile industry, the Land Rover Defender is presently being used in over
150 countries around the world because of its simplicity of design and sturdiness.
As far as the production of cars in the country is concerned, against 30,131 cars in 1995-96,
production stood at 160,642 units in 2005-06, showing an increase of 430 per cent during the
last 10 years. The local carmakers are expected to roll out 200,000 cars during the current year,
while the country has an annual production target of 500,000 to achieve by the year 2010.
As a result of this demand driven growth in the production of cars in the country, all automobile
units are now either running on double shift basis or intend to go into double shifts.
The level of motorisation has also been gradually rising over the years. In 1998-99, it was three
cars per 1000 persons, which has significantly increased to 11 cars per 1000 persons in 2005-06.
For a developing country like Pakistan, such rapid motorisation is a sure indicator of accelerated
growth in the industrial sector in general and the auto sector in particular.
Notwithstanding a manifold increase in car production during the last few years, the country still
stands relatively low in terms of motorisation when compared globally and even to its
neighbours like Iran, which has a ratio of 23 cars per 1000 persons. Naturally, the demand for
cars in the country is still a lot greater than their supply.
Similarly, the indigenous production of motorcycles increased by 25 per cent during 2005-06,
reaching to an all-time high of 520,124 as compared to 106,797 units in 1996-97, which
accounts for around 380 per cent increase in motorcycle production during the last nine years.
Pakistan aims at producing 700,000 units of motorcycles during the year 2006-07. Since it has
achieved autarky in the production of motorcycles, the country has started exporting the units
over and above its national requirements to overseas markets.
The production of trucks as well as that of buses has also posted sufficient increase during the
last 10 years. Some 2,994 units of trucks were being produced in the country in 1995-96 which,
over the years, have increased to 4,518 units, showing a rise of 51 per cent. In the case of buses,
the rise in production is more pronounced as compared to that of trucks as their production
augmented by around 74 per cent during the last decade or so.
The increase in demand for automobiles can be traced to rising income levels, creation of new
job opportunities and liberal auto financing by financial institutions. As a result, on an average,
some 13,000 vehicles are assembled and marketed every month. The country has also started
importing vehicles. The result is a quantum jump in car registrations, primarily due to bank
leases. In the capital city of Islamabad alone, some 2000 vehicles are registered every month.
While all this is leading the motorisation of the country, it can't be ignored that this influx of
new vehicles has made the existing road infrastructure insufficient, giving rise to the need to
improve and widen the national roads network. And yet, this will lead to the creation of more
jobs thereby accelerating the pace of economic activities in the country.
Presently, over five million registered vehicles are plying on the country's roads, measuring 0.8
million kilometers. Some 457 motorways have already been constructed in the country, while
more highways are planned to be built in different parts of the country with Rs527 billion (US$
878.3 million) in the next eight years.
The road construction spree would further bolster economic activities, creating new jobs and
more opportunities for gainful employment all over the country.
Meanwhile, auto financing and other such schemes have given rise to lucrative consumer
banking. Though the main objective of consumer financing is to solve some of the immediate or
short-term problems of the customers, it is resulting, at the macro level, in giving a push to
large-scale manufacturing, creating new jobs and positively impacting the GDP growth.
When the government undertook restructuring of the economy, it was expected that bulk of
excess liquidity available in the market post 9/11 would go towards the development of the
corporate sector. However, this did not happen, while the banks faced a dilemma of excess
liquidity. Therefore, they started diverting their funds towards the more lucrative consumer
financing.
Now, as a matter of policy, most commercial banks are aggressively focusing on consumer
financing, through attractive packages, because it offers them a better rate of return as
compared to the corporate sector. The average lending rate on consumer financing is around 16
per cent as compared to 9 - 11 per cent on corporate lending.
As a result of this spurt in auto, real estate and IT sectors, almost all banks have registered
windfall profits. For example, the National Bank of Pakistan has declared a net profit of Rs12.7
billion (US$ 212 million) and Muslim Commercial Bank Rs8.9 billion (US$ 148 million) for the
year 2005, showing an increase of 104 per cent and 251 per cent respectively over their
previous year's profits. The performance of other banks is equally impressive. United Bank
Limited has declared a net profit of 62 per cent, Faysal Bank 75 per cent, The Bank of Punjab 72
per cent, Union Bank 110 per cent, Metropolitan Bank 80 per cent, Bank Al-Habib 171 per cent
and so on and so forth.
Swelling bank profits have enabled them to offer attractive salary packages to their
functionaries. A better salary structure would naturally enable the employees to spend more on
items like vehicles, which would further push up the domestic demand for automobiles and, in
turn, impact their local production as well.
One hopes that the cycle of rise in demand and supply in the auto sector would have a healthy
effect on the national economy as a whole, ensuring continuity in its growth. It has already led
to the growth of a fairly strong auto-parts manufacturing/ vending industry, which is not only
meeting the demand of the local assemblers in a sizeable number of auto-parts, but also
competing in the international market for a share in the global auto-parts market.
Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) was formed in

1988 to represent and to provide technical and management cooperation to its members.
PAAPAM, with its almost a decade old history, has attained a level of an indispensable and
extremely effective link between the policy-making echelons at government and the whole
entity of its member firms.
The Association achieved recognition form the Government of the Pakistan in 1999 and today is
represented in many Government and semi government as well as Private Institutions by its
members. PAAPAM is the member of the Federal of Pakistan Chamber of Commerce & Industry
(FPCCI).
With a registered membership base of over top line tier one 278 members and general
manufacturers base of over 1200 companies, PAAPAM has under its wings manufacturing
companies making parts for Pakistan’s Cars, Motorcycle, Tractors, Trucks and Buses assemblers.
Investments in place now exceed US$ 1.5 billion.
PRODUCTION (P) & SALE (S) OF VEHICLE FROM 1995 ONWARD
CAR 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
2005-06 2006-07
1300-1600cc (2000cc Diesel) Upto-Oct.'06
Honda (Civic) P 4,666 3,922 4,071 3,928 4,744 5,824 4,615 4,610 5,998 12,359 12,274 1,639
S ~ ~ ~ 3,794 4,871 4,873 4,625 4,637 6,097 12,352 11,998 1,951
Honda (City) P ~ ~ ~ ~ ~ ~ 3,386 3,786 7,417 11,771 17,606 3,615
S ~ ~ ~ ~ ~ ~ 3,382 3,749 7,271 11,714 16,136 3,878
Suzuki (Baleno) P ~ ~ ~ 2,412 2,904 1,251 1,240 2,608 4,153 5,965 2,939 0
S ~ ~ ~ 2,045 2,883 1,484 1,188 2,588 4,062 5,879 3,173 0
Suzuki (Liana) P ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 5,370 4,352
S ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 4,571 2,458
Toyota (Corolla) P 4,731 5,164 5,651 8,369 8,705 8,486 5,763 12,861 20,525 23,007 31,094
11,162
S ~ ~ ~ 8,268 8,778 8,116 6,151 12,867 20,321 23,002 30,527 11,439
Nissan (Sunny) P ~ 599 933 481 83 319 81 51 26 0 0 0
S ~ ~ ~ 546 95 310 113 69 25 1 0 0
Kia (Classic NGV) P ~ ~ ~ ~ ~ ~ ~ 459 188 465 0 0
S ~ ~ ~ ~ ~ ~ ~ 687 81 546 0 0
Kia (Spectra) P ~ ~ ~ ~ 890 1,784 2,091 384 73 1 0 0
S ~ ~ ~ ~ 825 1,375 2,287 434 127 7 0 0
1000cc
Suzuki (Khyber/ Cultus) P 5,720 6,280 5,019 6,991 4,635 6,290 5,441 8,097 10,810 15,591 21,342
8,200
S ~ ~ ~ 6,768 4,824 6,027 5,637 7,927 10,795 15,611 21,390 7,913
Suzuki (Alto) P ~ ~ ~ ~ ~ 4,489 2,816 4,775 7,196 11,411 17,513 6,560
S ~ ~ ~ ~ ~ 4,187 3,072 4,701 7,148 11,431 16,823 6,789
Hyundai (Santro Plus) P ~ ~ ~ ~ 599 3,937 1,667 3,114 7,902 6,101 8,604 590
S ~ ~ ~ ~ 378 3,454 2,245 3,135 6,922 7,009 7,031 1,332
800cc
Daihatsu (Cuore) P ~ ~ ~ ~ 1,353 3,304 2,845 4,580 6,468 8,525 7,883 4,221
S ~ ~ ~ ~ 1,382 3,052 3,174 4,579 6,339 8,592 7,883 4,190
Suzuki (Mehran) P 8,986 13,482 14,936 16,501 8,548 3,889 10,143 16,748 27,705 31,207 35,433
11,121
S ~ ~ ~ 15,841 7,838 5,169 9,964 16,582 27,432 31,165 35,982 10,757
Suzuki (Margalla) P 6,028 3,174 3,074 ~ ~ ~ ~ ~ ~ ~ ~ ~
S~~~~~~~~~~~~
TOTAL CARS: P 30,131 32,621 33,684 38,682 32,461 39,573 40,088 62,073 98,461 126,403
160,058 51,460
S ~ ~ ~ 37,262 31,874 38,047 41,838 61,955 96,620 127,309 155,514 50,707
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
2006-07
TRUCK Upto-Oct'06
Hino P 1,533 1,164 240 261 489 294 618 792 1,020 1,196 1,499 773
S ~ ~ ~ 278 455 309 626 758 948 1,262 1,449 601
Nissan P 383 795 483 251 174 198 206 627 898 1,306 1,652 186
S ~ ~ ~ 259 193 198 204 614 845 1,326 1,478 258
Dong Feng P 789 696 784 486 250 420 310 510 104 23 4 2
S ~ ~ ~ 430 318 351 378 511 75 27 16 2
Master P ~ ~ ~ ~ ~ ~ ~ ~ ~ 551 466 171
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 565 464 141
Isuzu P 165 79 59 N.A. N.A. N.A. N.A. N.A. N.A. 128 897 366
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 165 866 353
Volvo P ~ 4 112 85 0 0 0 0 0 0 0 0
S ~ ~ ~ 4 56 67 0 0 0 0 0 69
Transmobile (Yasoob) P 124 179 5 ~ ~ ~ ~ ~ ~ ~ ~ ~
S~~~~~~~~~~~~
TOTAL TRUCKS: P 2,994 2,917 1,683 1,083 913 912 1,134 1,929 2,022 3,204 4,518 1,498
S ~ ~ ~ 971 1,022 925 1,208 1,883 1,868 3,345 4,273 1,424
BUS
Hino P 186 206 186 258 534 444 630 756 1,195 1,392 668 264
S ~ ~ ~ 223 501 455 560 795 1,187 1,293 649 309
Nissan P 50 79 108 266 146 102 36 60 96 120 48 12
S ~ ~ ~ 252 162 102 36 36 107 93 79 12
Dong Feng P 154 70 220 600 780 780 420 480 89 110 40 4
S ~ ~ ~ 585 699 827 469 501 69 131 47 12
Master P ~ ~ ~ ~ ~ ~ ~ ~ ~ 21 6 1
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 23 10 1
Isuzu P 84 101 77 N.A. N.A. N.A. N.A. N.A. N.A. 119 63 26
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 65 142 17
TOTAL BUSES: P 474 456 591 1,124 1,460 1,326 1,086 1,296 1,380 1,762 825 307
S ~ ~ ~ 1,060 1,362 1,384 1,065 1,332 1,363 1,605 927 351
LCV 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
2005-06 2006-07
(4X4) Upto-Oct'06
Suzuki Jeep (Potohar) P 2,274 792 657 622 380 459 564 374 807 1,120 1,290 484
S ~ ~ ~ 615 464 432 506 465 807 1,107 1,298 475
Sigma (Defender) P ~ ~ ~ ~ ~ ~ ~ ~ ~ 444 1,182 384
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 407 1,222 374
VAN
Suzuki (Bolan) P 3,288 4,411 4,992 4,245 2,871 1,983 2,591 4,359 5,201 7,319 10,429 4,088
S ~ ~ ~ 4,075 3,037 2,263 2,540 4,360 5,228 7,241 10,451 4,070
PICK-UP
Suzuki (Ravi) P 1,743 2,376 2,620 2,034 1,066 778 1,482 1,701 2,085 3,310 5,418 2,695
S ~ ~ ~ 1,952 1,121 854 1,472 1,710 2,087 3,286 5,416 2,684
Toyota (Hilux) P 939 2,177 2,223 1,800 1,185 1,411 1,697 3,045 2,229 3,394 2,575 0
S ~ ~ ~ 1,799 1,223 1,360 1,741 2,861 2,399 3,389 2,551 30
Dong Feng P ~ ~ ~ ~ ~ ~ ~ ~ 304 21 24 3
S ~ ~ ~ ~ ~ ~ ~ ~ 209 86 33 7
Hyundai (Shehzore) P ~ ~ ~ ~ 1,534 2,793 2,721 3,069 4,270 8,022 9,368 2,067
S ~ ~ ~ ~ 1,429 2,827 2,774 2,987 4,203 8,012 9,234 2,149
Master P ~ ~ ~ ~ ~ ~ ~ ~ ~ 1,547 1,767 435
S ~ ~ ~ ~ ~ ~ ~ ~ ~ 1,528 1,717 397
TOTAL LCVs: P 8,244 9,756 10,492 8,701 7,036 7,424 9,055 12,548 14,896 25,177 32,053 10,156
S ~ ~ ~ 8,441 7,274 7,736 9,033 12,383 14,933 25,056 31,922 10,186
(2000cc 4WD)
Kia (Sportage) P ~ ~ ~ ~ ~ ~ 513 820 802 414 0 0
S ~ ~ ~ ~ ~ ~ 503 814 698 425 0 0
TOTAL SUV: P ~ ~ ~ ~ ~ ~ 513 820 802 414 0 0
S ~ ~ ~ ~ ~ ~ 503 814 698 425 0 0
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
2006-07
FARM TRACTOR Upto-Oct'06
Fiat (New Holland) P 6,503 4,939 6,288 12,198 18,373 16,265 9,138 12,114 16,637 20,840
24,574 8,495
S ~ ~ ~ 12,272 7,038 15,876 9,371 12,617 16,888 21,163 24,649 8,433
Millat (Massey P 9,590 5,478 7,856 14,446 6,186 15,370 14,663 14,126 19,133 22,360 24,313
6,742
Ferguson) S ~ ~ ~ 15,142 16,163 15,245 14,630 14,215 19,012 22,415 24,153 6,545
TOTAL FARM P 16,093 10,417 14,144 26,644 24,559 31,635 23,801 26,240 35,770 43,200 48,887
15,237
TRACTORS: S ~ ~ ~ 27,414 23,201 31,121 24,001 26,832 35,900 43,578 48,802 14,978
MOTORCYCLE
Honda P ~ 68,637 63,463 59,639 59,357 78,397 90,111 115,924 190,679 287,271 360,561
105,000
S ~ ~ ~ 61,536 58,579 78,062 90,027 117,201 190,424 287,172 360,110 105,471
Yamaha P ~ 38,160 25,040 23,435 23,448 22,999 22,444 27,427 50,407 71,560 74,423 17,490
S ~ ~ ~ 23,276 23,719 23,222 22,024 27,886 50,435 71,498 74,293 17,783
Suzuki P ~ ~ 4,475 4,430 4,154 7,454 8,072 13,610 27,863 26,234 16,954 6,705
S ~ ~ ~ 4,738 4,360 7,365 8,062 13,788 27,435 26,002 17,183 6,760
Sohrab P ~ ~ ~ ~ ~ ~ ~ 6,801 12,396 12,065 14,804 2,017
S ~ ~ ~ ~ ~ ~ ~ 2,403 12,494 12,127 13,943 2,764
Sohrab (Triwheeler) P ~ ~ ~ ~ ~ ~ ~ 1,343 3,031 3,258 2,166 615
S ~ ~ ~ ~ ~ ~ ~ 585 3,013 3,186 2,218 651
Qingqi (Triwheeler) P ~ ~ ~ ~ ~ ~ ~ 10,064 19,007 15,801 17,198 3,054
S ~ ~ ~ ~ ~ ~ ~ 10,010 17,855 17,081 15,757 3,149
Fateh Hero P ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 34,018 9,430
S ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 33,136 9,449
TOTAL MOTOR- P ~ 106,797 92,978 87,504 86,959 108,850 120,627 175,169 303,383 416,189
520,124 144,311
CYCLES: S ~ ~ ~ 89,550 86,658 108,649 120,113 171,873 301,656 417,066 516,640 146,027
ANNUAL PLANT CAPACITY
CAR
Pak Suzuki Motor Co. Ltd. 68,000
Indus Motor Co. Ltd. 34,000 *
Honda Atlas Cars (Pakistan) Ltd. 30,000
Dewan Farooque Motors Ltd. 15,000
Ghandhara Nissan Ltd. 6,000
LCV & 4X4

Pak Suzuki Motor Co. Ltd. 12,000 (LCV 11,000, 4x4 1,000)
Indus Motor Co. Ltd. 8,000
Dewam Farooque Motors Ltd. 10,000
Sigma Motors (Pvt.) Ltd. 4x4 Land Rover
Manufactured at
Ghandhara Nissan Plant.
SUV
Dewan Farooque Motors Ltd. Not declared
TRUCK
Hinopak Motors Ltd. 10,000
Ghandhara Industries Ltd. 3,000
Sind Engineering Ltd. 3,000
VPL Limited 500 ****
Master Motor Corporation Ltd. 8,050
BUS
Hinopak Motors Ltd. 2,000
Sind Engineering Ltd. 1,000
Ghandhara Industries Ltd. 1,800 ***
Ghandhara Nissan Ltd. -
TRACTOR
Al-Ghazi Tractors Ltd. 25,000
Millat Tractors Ltd. 25,000
MOTORCYCLE
Atlas Honda Ltd. 400,000
Dawood Yamaha Ltd. 200,000
Suzuki Motorcycles Pakistan Ltd. 65,000
Saigols Qingqi Motors Ltd. 100,000
Pakistan Cycle Industrial Cooperative 42,000 **
Society Ltd. (Sohrab)
Contribution of Cars and LCV’s to Pakistan’s Economy

Description Cars LCV’s
Contribution to GDP Rs. 30 billion Rs. 6 billion
Revenue to GOP Rs. 10 billion Rs. 1.5 billion
Direct Employment 3000 jobs 1500 jobs
Investment Rs. 10 billion Rs. 2 billion
Import Substitution $ 500 million $ 100 million
Foreign Exchange Savings $ 200 million $ 70 million
LIST OF LOCALLY ASSEMBLED AUTOMOBILES
PRICE LIST OF CAR IN PAKISTAN
LOCALLY ASSEMBLED MOTORCYCLES PRICE LISTS

Porter’s Model Analysis of Pakistan Automobile Industry
Government
The government has always been over protective of the automobile sector. The key behind this
argument being that Pakistan’s car market is small and to make any foreign automobile
company set up its plant here special set of incentives are needed. Even though this has
remained core policy, due to unprecedented increase in demand has made the government
rethink its policy.
The most recent example of liberalizing imports in cars has opened up the market for imported
cars again. Previously the lobbying power of the manufacturer was so great that duties on
imported cars were as high as 300%.
Similar issues can be seen with motorcycle. The availability of more consumer finance has
effected the middle income groups too. Government in order to accommodate more these
groups has allowed the import of Chinese motorcycle which even at 100 %.
The manufacturers of buses are also facing problems due to misuse of the import laws. After
some hue and cry the government has streamlined its policy with the introduction of a pre-
determined five-year tariff under the Auto Industry Development Plan (AIDP) to increase
production turnover of the auto industry and annual export of parts to $10 billion (Rs600bn) and
$650m (Rs39bn) respectively by 2011.
The plan discourages import of used cars through tariff measures and calls for introduction of a
computerised registration system on a uniform basis for access across the country.
The annual gross sales turnover of the auto industry, at present, stands at Rs210 billion while
export of auto parts are estimated at $35 million. As such, the increase in production turnover is
projected to increase by 185 per cent while the exports of auto parts would make quantum
jump.
The plan envisages development of two auto-parts vendor clusters near Port Qasim, Karachi and
Motorway, Lahore and seeks to reduce the existing monopolistic tendencies of the existing
manufacturers by encouraging new entrants.
It seeks to enhance auto-sector’s contribution in GDP to reach 5.6 per cent and the share in
manufacturing sector to 25 per cent by 2011. Likewise, the employment level has been
projected to increase from 192,000 to 250,000 as direct jobs and from around one million to 2.5
million indirect jobs.
It has proposed a phased reduction of tariff for the high tariff rates of localized items and the
tariffs would come down by at least 15 percentage points for the localized components within
five years but still remain higher than CKD (completely knocked down) tariffs for non-localized
components.
As such, the tariff for vendors and manufacturers of parts and components which is currently
zero for raw material, five per cent for sub-components and 10 per cent for components would
be reduced to zero for all the three categories from next year. The import duty on completely
built units (CBU) of cars would not be further lowered to encourage investment in the auto
sector, components and manufacturing.
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 existing 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 localized CKD parts of tractors and heavy commercial vehicles, the existing tariff of 35 per
cent has been proposed to be reduced to 25 per cent in 2010-11.
For prime 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.
The government has also proposed to allow the assembly of new entrants through import of
100 per cent CKD kit at the rate of duty applicable to non-indigenised parts. However, they
would be asked to provide a commitment to develop and purchase local parts for fitment in the
locally assembled cars. Some productive asset investment incentives would also be provided to
the vendors and manufacturers.
Buyer Power
In Pakistan automobile market the power of the buyer is limited. It is only effective with no
powerful lobbying group. This has tended to lead the government to favor other side then
consider their aspect on issues. The recent changes in liberalization were made after a lot of
protests were made people and that too after a period of 3 years of consisting paying almost
premiums of 10% prior to import liberalization.
Now with more choice with models, premium affecting the buyers is limited to certain models
out of which maximum premium is of Rs 60,000 is on Corolla Xli. Thus the power of buyers in
Pakistan our auto sector is does not play a significant part in determining how policy is
determined.
In our analysis the major reason for lack of buyer power is lack of consumer groups in our
country. As our country is still progress it is hoped that in the future with development of
consumer groups in the country will lead to similar formations in the automobile sector.
Supplier Power
The power of manufacturing companies is immense in our country. All companies have their
CKD kits imported from abroad through their parent companies. This situation offers little room
for local suppliers. Another aspect which might have been useful to supplier is the deletion
program. The government has not been able to implement it due to lobbying power of the
manufacturing companies. As a result supplier tend to toe the line of the manufacturers. This
scenario is present in all segments of the auto industry in Pakistan.
Threat of New Entrants
In our industry we have become prone to Honda, Toyota and Suzuki even if the public is getting
a better imported car in same price range major part of our population will go for same existing
local assembled brands.
There is lot of dissonance about imported cars. Consumers tend to assume that they have
defects and the dealer is trying to sell them something not worth their money. Imported cars
may excellent safety standards but lack of awareness of them is hindrance in the local market.
With all this said, imported cars have reduced the premiums on cars.
The upcoming entrants in the cars market who plan to setup assembly plants are Proton and
Renault. This is likely to make the competition and reduce prices.
The story is different in motorcycle market. The lower income group which have been offered
imported Chinese motorcycles lead them to accept this as the other Japanese brands did not fall
in their category. This has lead to prominent brands reducing their prices by Rs 10,000 to Rs
15,000.
Rivalry
There is very strong competition in motorcycle industry with many Chinese motor bikes coming
into the market. In their response the local manufacturers had to decreased prices by Rs 10,000
to Rs 15,000. There are currently 44 motorcycle assemblers in Pakistan. Today the customers
have a choice of wide range of motorcycle of Japanese and Chinese brands at internationally
competitive prices which have only become possible due to local contents and availability of
highly productive and inexpensive human resources.
The motorcar industry has also seen a drastic change with the import of vehicles being allowed
in the recent few years there have been a large number of imported cars flushed into the
market which have led to the decrease in on-money prices of the locally assembled car
New firms have also entered the market such as proton and Renault are having talks with the
government to enter the market both these company’s have the intention of setting up plants in
the country which will increase the local assembled car production
Buses and Trucks in Pakistan
Pakistan has a growing market for vehicles and accessories (including tractors), offering
exceptionally good sales opportunities for exporters in the bus and heavy truck segments. The
total number of vehicles in Pakistan is over 4.9 million units. Annual demand is estimated at
300,000 units, which is being met from local sources and imports. Total imports are valued at
US$300 million. The local production of after market vehicle parts and accessories is estimated
at US$850 million. Four hundred vendors that manufacture vehicle parts and accessories
support 25 vehicle manufacturing and assembly facilities in Pakistan. Only five of these vehicle
manufacturers are engaged in the manufacture/assembly of buses and trucks.
The vehicle industry demonstrated a very impressive growth rate of 46.7 percent during the
past fiscal year, mainly due to growth in demand and the availability of consumer credit and low
interest rate loans. The local governments encourage franchised companies to introduce more
buses on city routes by providing 4 percent loans for bus purchases. The government is also
giving 10 percent rebates of custom duties for the import of public transport vehicles. Recently,
the government exempted buses in Completely Knocked Down (CKD) condition from customs
duty irrespective of whether they ran on Compressed Natural Gas (CNG) or diesel fuel. Import
under this customs duty exemption is channeled through Small and Medium Enterprises
Development Authority (SMEDA) and vehicles imported under this scheme cannot be resold or
transferred without obtaining permission from SMEDA. The general tariff regime in Pakistan is
20 percent on CKD both buses and trucks; and 60 percent on Completely Built Units (CBU) for
trucks and 20 percent on CBU for buses.
Buses using Compressed Natural Gas (CNG) are particularly in demand, as the government
applies the National Environmental Quality Standards related to air, water, and noise pollution
to the vehicle industry. CNG is an indigenous smoke-free, and relatively clean fuel. Recently, the
government has made tremendous progress in promoting CNG usage by setting up filling
stations, converting petrol-run vehicles, and providing incentives to entrepreneurs. As a result,
more than 265,000 vehicles have already been converted to CNG and the clean fuel has gained
instant popularity. Pakistan is reported to rank third among the CNG users in the world.
Companies engaged in manufacturing and assembling buses and trucks should consider entering
this market. For companies interested in selling vehicles in Pakistan, the best strategy is either to
find a local partner to act as the sole distributor/agent or to register and establish a
representative office in Pakistan. Pakistan has a sophisticated and regulated banking industry
with both state-owned and private banks offering a full range of financial services including
trade financing.
MARKET CHARACTERISTICS
STATISTICAL DATA
Market Size (U.S. Dollars, in Millions)

FY-2000/01 FY-2001/02 FY-2002/03 Projected Avg. Annual Growth rate for following 2 Years
Import Market 200 220 300 30%
Local Production 500 700 850 20%
Exports 30 25 30 5%
Total Market 670 895 1120 25-30%
Imports from US 2.2 2.5 3.5 5%
Exchange Rate 1US$=Pak Rupees 55 57 58
Source: Imports, Exports, Production: Federal Bureau of Statistics, Trade Sources and estimates
OVERVIEW (TRENDS AND HIGHLIGHTS)

Pakistan offers a promising market for vehicles and accessories, with good sales opportunities
for exporters in some segments of the industry. The total market has expanded from U.S.$670
million in FY-2001 to U.S.$ 1.2 billion in FY-2003 and is expected to grow by 25-30 percent
annually over the next two years. Available data indicates that the U.S. import share grew from
2.2 percent in 2001 to 3.5 percent in FY-2003. Other major suppliers were Japan, South Korea,
Italy, and China. Production figures of vehicles are as follows:
Vehicle Production in Units

Description Installed Capacity
(per annum)
Production
2000-2001
Production 2001-2002 Production
2002-2003
Motorcycles 340,000 108,500 120,627 165,105
Cars 106,000 39,573 40,601 62,073
*LCVs 28,000 7,424 9,055 12,548
Trucks 12,500 912 1,134 1,929
Buses 1,900 1,326 1,086 1,296
Tractors 33,000 31,955 23,801 26,240
Total 521,400 189,689 196,304 269,191
Source: Pakistan Automotive Manufacturers Association
*Light Commercial Vehicles
Vehicle Export and Import: Pakistan does not qualify as a major exporter of vehicles. Its exports
are limited to tractors and a few thousand motorcycles. However, the export of vehicle parts is
registering continuous growth over the last few years. The local manufacturer of original
equipment manufacture (OEM) parts has encouraged Pakistani vendors to enter the export
market. Vehicle-part exports were approximately US$30 million in FY-2003. Exporting
destinations including Europe, Australia, Indonesia, Japan, Sri Lanka, Iran, and the Gulf States
has enhanced the credibility of Pakistan vehicle parts manufacturers.
Import of CKD (Completely Knocked Down) and CBU (Completely Built Units) Vehicles for FY-
2000, FY-2001 and FY-2002
Commodities
1999-2000 2000-2001 2001-2002
Quantity
(Number)
Value
(Thousands of US$)
Quantity
(Number)
Value
(Thousands of US$)
Quantity
(Number)
Value
(Thousands of US$)
CKD 39,044 174,277 16,251 175,657 20,204 189,177
CBU 4,753 35,067 1,716 18,013 2,120 24,632
Total: 43,797 209,344 67,967 193,670 23,409 213,809
Source: Ministry of Commerce, Pakistan
The total number of vehicles in Pakistan is over 4.9 million. An annual demand is estimated at
300,000 units, which is being met from local sources and imports. Import total around US$300
million. The local production of after market vehicle parts and accessories is estimated at US$
850 million. There are 25-vehicle manufacturing and assembly facilities in Pakistan that are
supported by 400 manufacturers of vehicle parts and accessories. The vehicle industry
demonstrated a very impressive growth rate of 46.7 percent during the past fiscal year, mainly
due to surging demand and the availability of consumer credit and low interest rate loans.
The government initially plans to import about 2,000 dedicated Compressed Natural Gas (CNG)
buses annually. Private sector has already taken initiative and would shortly operate a fleet of
300 CNG buses in Karachi. Currently, there are about 100,000 diesel-run buses plying on the
roads, which need to be converted to the CNG in FY-2005-06. Various countries have shown
interest in extending economic and technical assistance for the conversion of these buses to
CNG in major cities. Pakistan continues to depend on the imported CNG conversion kits.
The Pakistan Environmental Protection Council and its related provincial agencies have been
established to implement the national environmental control policies. The government has
applied the National Environmental Quality Standards related to air, water, and noise pollution
to the vehicle industry. Air pollution in Karachi and Lahore at present is reported to be 20 times
more hazardous than the World Health Organization's standards, and continues to rise. The
government is promoting environmentally sound technologies and the use of alternate fuels for
vehicles, and encouraging the use of better quality of fuel and improved maintenance of the
vehicles. CNG is an indigenous, smoke-free, and relatively clean fuel. Recently, the government
has made tremendous progress in promoting CNG usage by setting up filling stations, converting
petrol-run vehicles, and providing incentives to entrepreneurs to switch to CNG run vehicles. As
a result, more than 265,000 vehicles have already been converted to CNG. Pakistan has 32
trillion cubic feet of proven natural gas reserves and potential reserves of 200 trillion cubic feet.
It currently produces 2,236 million cubic feet per year.
Vehicle assemblers in Pakistan have responded by marketing dedicated CNG cars and buses that
have gained instant popularity. Thus, Pakistan is reported to rank third among the CNG users in
the world. The network of the CNG buses is to be extended to other cities, including Islamabad,
in the next phase of the government’s plan.
Number of Registered Vehicles in Pakistan
Description
FY-1997 FY-1998 FY-1999 FY-2000 FY-2001 July-Dec
FY-2002*
Motor Cars, Jeeps & Station Wagons
1,068,116
1,085,969
1,162,876
1,182,307
1,199,963
236,129
Motor Cabs/Taxis 83,182 83,687 83,844 83,892 92,062 56,590
Buses 119,365 125,929 150,108 154,401 161,887 69,636
Trucks 131,322 132,895 145,111 148,569 156,588 57,141
Motor Cycle (2 Wheels) 1,995,421 2,068,730 2,175,488 2,260,772 2,283,381 196,991
Motor Cycle (3 Wheels) 76,224 81,777 95,345 99,376 107,555 32,719
Others 700,315 724,309 746,718 772,279 786,907 199,293
Total
4,173,945 4,303,296 4,559,490 4,701,596 4,788,343 848,499
*6 months data from July-December Source: Federal Bureau of Statistics
Market share of Japanese brands (Assembled in Pakistan)

Car Make
(Brand)
Motorcycles Buses/Trucks LCVs Tractors % share
90% 90% 80% 50% 0%
Suzuki Honda Nissan Suzuki
Toyota Yamaha Hino Toyota
Honda Suzuki Mazda
Nissan
Daihatsu (Cuore)
Market share of non-Japanese brands (Assembled in Pakistan)

Car Make
(Brand)
Motorcycles Buses/Trucks LCVs Tractors
10% 10% 20% 50% 100%
Hyundai Qingqi Dong Feng Hyundai Massey Ferguson
Kia Sohrab Volvo Kia Fiat
Fiat Zabardast Universal

Overview of Technical Collaboration in Vehicle Industry
Category Number of
Manufacturers/Assemblers
Technical Collaborations Status
Cars 6 Japan 5 Republic of Korea 2 Italy 1
LVCs 3 Japan 2 Republic of Korea 1
Jeeps 1 Japan 1
Trucks and Buses 4 Japan 3 China 1 Sweden 1
Tractors 3 United Kingdom 1 Italy 1 Romania 1
2/3-Wheelers 8 Japan 3 Italy 1 China 3 Pakistan (local brand) 2
Total: 25 29
Due to limited market size, the production volumes have been low in the past but the industry
has undoubtedly entered a new era as it produces eight international brands in various models.
In order to meet rising demand the vehicle industry has considerably increased its production
capacity. The vehicle industry in Pakistan can be broadly categorized into following segments:
The industry operates under franchise and technical cooperation agreements with leading world
manufacturers. Japanese, Korean, and European entrepreneurs have invested almost US$ 1.5
billion in Pakistan's vehicle sector, whereas the local investment is approximately US$ 1.0 billion.
Twenty-five leading manufacturers/assemblers in Pakistan have set up as joint ventures,
technical collaboration in vehicle industry with foreign multinational companies. Five out of 25
leading local manufacturers are engaged in the manufacture/assembly of buses and trucks. This
Industry Sector Analysis (ISA) report covers Trucks and Bus sector of vehicle industry in Pakistan.
COMPETITIVE ANALYSIS
Market Share of Buses and Trucks
Buses:
Hino (Hinopak Motors) 58.3%
Mazda (Sind Engineering) 37.1%
Nissan (Ghandhara Nissan) 4.6%
Trucks:
Hino (Hinopak Motors) 41.0%
Mazda (Dong Feng) (Sind Engineering) 26.5%
Nissan (Ghandhara Nissan) 32.5%
Domestic Production: The Production and Sales of buses (Hino, Mazda, Nissan) stood at 1,296
and 1,332 units in FY-2003 as compared to 1,086 and 1,065 units in FY-2002. The Production and
Sales of trucks (Hino, Mazda (Dong Feng) and Nissan) in FY-2002/03 jumped to 1,929 and 1,883
units, respectively, from 1,134 and 1,208 units in FY-2001/02.
An assembler linked the rise in bus production to rising sales of buses under the Urban
Transport Scheme (UTS) in Punjab. Bus sales should increase in coming months as Sindh and
NWFP introduce their respective transport plans. In the truck segment, Sindh Engineering,
maker of Mazda trucks, has entered into an agreement with leading Chinese truck assembler,
Dong Feng, to introduce Chinese trucks. Those will replace Mazda trucks as the Mazda Motor
Corporation, Japan, has indicated it will not be able to supply the T-3500 chassis. Under a
franchise agreement, the Chinese company will assemble vehicles of 1.5 tons; 3.9 tons and 15
tons pay load commercial vehicles fitted with Cummins engines. A 1.5-ton (capacity 2600cc)
Chinese truck - Zabardast - had already been launched in March 2002 by Adam Motor Company,
a sister concern of Omar Jibran Engineering Industries Limited, in collaboration with Jiangsu
Mudan Automobile Group Company of China. Master Motor Corporation, a subsidiary of Master
Group of Industries; has started production of medium loaded trucks and luxury buses in
collaboration with China.
National Logistics Cell (NLC), which pioneered transportation of goods by long bodied vehicles
and established Container Freight Stations and Inland Dry Ports, has recently repositioned its
logistical resources including establishment of major warehousing facilities in Quetta (located on
the Pakistan - Iran border) and at Nowshera (Pakistan-Afghanistan border). It has a fleet of 1318
vehicles with Dry cargo carrying capacities ranging from 25-50 tons individually and 382 vehicles
in Liquid cargo tankers with capacity ranging from 9,000 liters to 40,000 liters. The Dry and
Liquid cargo transportation resources comprise 6x4 and 4x2 configuration Prime Movers
coupled with 40 feet and 20 feet containers, Flatbed Trailers, Low bed Trailers, Car carriers and
Tankers.
Dry Cargo Carriers (with Trailers) Nos Capacity

Mercedes Benz 413 25
Volvo 357 25 TO 50
Mitsubishi 168 25 TO 40
Renault 356 25 TO 50
Mitsubishi Car Carrier 24 8 cars
1318 Total: 39,249
and 192 Cars
Bowzers Nos (Lits)
Mitsubishi 80 28000 To 40000
Renault 99 25000 To 35000
Volvo 125 25000 To 40000
304 10.938 million
liters
Water Bowzers Nos (Lits)

Mercedes Benz 32 9000
Isuzu Water Bowzers 2 9000
Mitsubishi Water Bowzers 34 27000 To 30000
Renault Water Bowzers 9 25000 To 35000
Volvo 1 25000
Total: 78 Total: 1.728
million liters
The road sector, however, is more promising. Pakistan has a road network covering 251,845
kilometers including 151,028 high type and 100,817 low type roads. The total roads increased
from 170,823 Km in 1990-91 to 251,661 in 2001-02, to 251,845 Km in 2002-03 or by 47.4
percent. In 2003, some 4.44 million registered vehicles were plying a network of 249,959 Km in
pursuit of business and pleasure. Out of this, 148,569 were load-carrying trucks of capacities of
10, 20, and 40 tons.
Population of Pakistan Province-wise
1951, 1981, 1998, and 2003 (Estimated)
(Population in thousand)
Total
Punjab Sindh NWFP Baluchistan FATA Islamabad

Year 1951 33816 20557 6054 4587 1187 1337 94
Year 1981 84453 47292 19229 11061 4332 2199 340
Year 1998 130600 72585 29991 17577 6510 3138 799
Year 2003 149030(E) 82710(E) 34240(E) 20170(E) 7450(E) 3420(E) 1040(E)
FATA: Federally Administered Tribal Area Source: Population Census Organization
NWFP: North West Frontier Province

Buses and Trucks on the Road
(000 number)
Year Buses
Trucks
Tankers
Oil Water
1997-98 72.5 117.1 6.8 1.3
1998-99 84.4 121 6.8 0.7
1999-00 92.8 127.4 7.0 0.7
2000-01 97.1 132.3 7.2 0.8
2001-02* 99.6 135.6 7.4 0.8
July-March
2002-03*
97.0 149.0 8.8 1.1
*Estimated Source: National Transport Research Center
NEW BUS TRANSPORT NEEDS BY PROVINCE
PUNJAB
Current Bus-Franchise Operation in Punjab

Lahore
Within City Engine Capacity
Horse Power (hp)

New Khan Metro Bus Services 255 - Non AC Buses 175-200 hp
Daewoo City Bus Division 70 - AC Buses 275-350 hp
Premier Bus Services 81 - Non AC Buses 175-200 hp
Baloch Bus Services 24 - Non AC Buses 175-200 hp
Chatta Bus Services 40 - Non AC Buses 175-200 hp
Monolite Bus Services 40 - Non AC Buses
(+12 Double Decker)
175-200 hp
Multan
New Khan Metro Brothers 81 - Non AC Buses 175-200 hp
Faisalabad
Minthar Metro Bus Services 40 - Non AC Buses 175-200 hp
Bashir Sons 40 - AC Buses 200-300 hp
Rawalpindi/Islamabad
Varan Tours 155 - Non AC Buses 175-200 hp
Total Buses: 798
Demand (under process):

Lahore
Premier Bus Services 40 - Non AC Buses 175-200 hp
Faisalabad
Minthar Metro Bus Services 20 - Non AC Buses 175-200 hp
Bashir Sons 40 – AC Buses 275-300 hp
Rawalpindi/Islamabad
Varan Tours 105 - Non AC Buses 175-200 hp
Lahore, capital of Punjab province, is the second largest metropolitan city of Pakistan having an
estimated population of about 7 million people. It is the principal commercial and banking
center of the province. Lahore serves as a distribution center for the heavily industrialized
surrounding area. An educational and cultural center, the city is the site of the University of the
Punjab (the oldest university in Pakistan), University of Engineering and Technology, and the
Lahore University for women. About 3.5 million people commute on a daily basis; the
passengers face serious transportation problems particularly during peak rush hours. In general,
the buses and mini-buses are over-loaded and the number of road-worthy vehicles is highly
insufficient to meet the demand. In addition, over half a million passengers arrive and leave the
city on 4,000 buses, wagons, and mini-buses daily.
The City District Government (CDG) of Punjab encourages franchised companies to introduce
more buses on city routes by providing 4 percent subsidized loans to transport companies and
individuals for purchasing buses. The government is also giving a 10 percent rebate on custom
duties for the import of public transport vehicles. There are more than 900 buses of six
franchised companies serving city routes in the Punjab province. Another 1600 large, CNG buses
are needed to replace the existing 8000 LCVs/wagons. Monolite Urban Star has introduced Euro-
2 standard environment-friendly Chinese buses. These vehicles will help reducing vehicular
pollution besides reducing traffic burden on the City roads. The CDG is not requiring the
transport companies to introduce air-conditioned buses as their fare is higher as compared to
the ordinary ones, but CDG is not averse to this option. The sustained growth in the demand for
passenger vehicles has produced very positive demand projections, as well as planned
investments of Rs.19 billion to meet the projected demand of 2210 buses for FY-2004 and FY-
2005. More than 74 private companies offered bids for operation with minimum 400 buses in
different cities of Punjab province under the franchise scheme.
Procedure for Grant of Franchise Buses & Incentives In Punjab
o Advertisement for bids

o Evaluation of bids by Evaluation Committee headed by Minister Transport
o Security of documents of financial soundness
o Bids Evaluation Committee recommends qualifying bids for approval of Chief Minister
o Final approval granted by Chief Minister, Punjab
o Franchise period-10 years
o Exclusivity of routes for operation
o Flexible fare structure
o Lease of land of PRTC Depots/terminals for operation, parking, office and workshop where
available
o Subsidy on the mark up of loans (70: 30) debit/equity ration up to a maximum of 5 % for A.C.
Diesel, 10% for CNG buses
o No concessionary fare
o Minimum fleet requirement for operation is 40 brand new buses and 20 for smaller cities
o Extended from bigger cities to smaller cities
o Exemption of import duty on import of buses
o Due protection to foreign investment
o Flexible/supportive legal structure of the operators
o Exemption from IRO and Declaration as an essential service to save from menace of unionism
SINDH
Current Urban Transport Scheme (UTS) in Sindh
Karachi
Within City Engine Capacity
Horse Power (hp)
The Green Bus Company 28 – Non AC Buses 175-200 hp
Allied Bus Service 30 – Non AC big Buses 300-350 hp
The Worldwide Express 30 – Non AC Buses 175-200 hp
Sweden Bus Company 32 – AC long Buses 300-350 hp
Green Bus Company 28 – AC Buses 200-300 hp
Metro Bus Service 197 – Non AC buses 175-200 hp
City of Karachi, with a projected population of 13 million (2003), requires 8000 buses for public
transport. Present mix of transport including mini-buses/wagons comes to 3000 buses.
* Some new investment has come in the shape of Green Buses/Metro Bus Service/Gray Horse
Public Transport Company Limited in Karachi including foreign investment from Swede-Spanish
company
* There is a current shortfall of 5000 long buses
* Karachi has 14,854 inter-city buses, which are owned by private operators.
* In addition, Karachi has 2 transport plans: 1) Urban Transport Scheme (UTS); and 2) Karachi
Public Transport Scheme (KPTS), a federal-funded project.
Karachi is the hub of a sprawling metropolitan area and is the nation’s largest city and its chief
transportation, financial, commercial, and manufacturing center. Most of the international trade
of Pakistan and landlocked Afghanistan passes through the city’s busy port. The City District
government Karachi (CDGK) has a passenger load of 10,000 to 15,000 on a daily basis. Five
million commuters use different public transport vehicles daily. At present 2321 big buses, 3601
mini-buses, and 3262 wagons serve the city. In addition, at least 4,000 additional large buses will
be needed to cater to the demand.
The Transport and Communication Department offered franchises on 18 new routes. Only six
are operational at present. The Green Bus Company serves 2 routes with 28 buses. The
Worldwide Express, a newcomer operates 2 lucrative routes with a fleet of only 30 buses. The
Sweden Bus Company, which is not a part of the Urban Transport Scheme (UTS). It was initiated
through the Karachi Public Transport Scheme (KPTS), a federal-funded project, and operates 32
buses. Various operators are running another 197 Metro buses under the KPTS. The mostly non-
air-conditioned diesel buses have a capacity for 40 seated and 50 standing persons, carrying a
total number of 90 passengers. These buses under the Urban Transport Scheme have a
concessional leasing rate of 7 percent, nearly 2 percent lower than the market rate, which is
being funded to the City District Government Karachi (CDGK) under federal sponsorship.
North West Frontier Province (NWFP)
Peshawar, the capital of North-West Frontier Province is a commercial center and the traditional
terminus of caravans from Afghanistan. Public transport vehicles in the province roughly total
258,000 -- 13,000 buses, 23,500 mini-buses, 105,000 trucks, 15,000 rickshaws, and 115,000
miscellaneous. The number of unregistered vehicles might be more than double the registered
ones.
The District Transport Authority (DTA) has decided to designate 21 new bus routes under the
UTS scheme in Peshawar. DTA is inviting bids from interested parties for at least five 50-seat
buses for each of the 21 new routes. In addition, the city required at least 500 buses to
overcome its lingering transport problem.
Problems Faced By the Automobile Industry
The automobile industry of Pakistan is an oligopoly with 22 automobile OEMs producing

passenger cars, commercial vehicles, tractors and motor cycles in collaboration with Japanese
and Korean manufacturers. The major assemblers/manufacturers are Pak Suzuki Motor Co. Ltd.,
Honda Atlas Cars (Pakistan) Ltd., Hinopak Motor Ltd., Indus Motor Co. Ltd., Ghandhara Nissan
Ltd., Ghandhara Industries Ltd., Atlas Honda, Suzuki Motor Cycles Co. of Pakistan Ltd., Dewan
Farooque Motors Ltd., World Korean Motors Ltd. (Pakistan), Allied Motors Ltd. and Fateh
Motors Ltd,l a lot of other Chinese companies have also entered the market like Cherry QQ . It
faces a number of obstacles:
* The Vendor industry plays a critical role in the growth of auto industry as all the component
parts are not manufactured under one roof. Development of vendor industry would be able to
expand the employment opportunities, reduce cost of production, pre-empt imports and help
achieve deletion programmes. There are four sources of spare parts, namely imports ($70
million annually), smuggling, vendor industry in organized sector and unorganized sector.
Organized sector consists of some 350 units such as Agriauto Industries Ltd., Allwin Engineering
Industries, Bolan Castings Ltd., Exide Pakistan Ltd., Atlas Battery Ltd., Axle Products Ltd.,
Balochistan Wheels Ltd., General Tyre and Rubber Company Ltd., Loads Ltd., Landhi Engineering
Works, Thal Engineering, Mali Auto and Agricultural Industries Ltd. Rao Engineering Ltd.,
Transmission Engineering Industries Ltd. and Sindh Engineering (Pvt) Ltd., supplying different
parts namely axle products, auto filter, wheel, tyre, gasket, engine valve, shock absorber,
automotive pump, piston radiator, radiator core, fly wheel, battery, etc.
In addition, there is a slew of small units in the unorganized sector located mostly in Karachi,
Lahore and Gujranwala which fabricate smaller parts (without brands or names of
manufacturer) such as ignition control system, micro touch button, dash board light indicator,
built alarm system, door operating system, handle lock revolving warning light and horn. These
are much cheaper than those produced under brand names or imported and, therefore,
command a big market, as disclosed by a spare parts dealer. The unorganized vendor industry is
producing quality products imitating foreign makes with extraordinary skill and expertise of the
experienced but unqualified workers. The quality is improving with keen competition among the
workers.
The vendor market hasn’t developed to the extent that it can provide the same quality supplies
as that of imports. Unabated smuggling of auto parts has hamstrung the development of vendor
industry. It will take a few years to meet the entire demand of spare parts for expanding the
automobile industry.
* The total auto market exceeds $1 billion, of which half is serviced by local production. Motor
vehicles worth $300 -$400 million are imported annually besides import of other transport
equipment worth $150- $200 million forming 4 to 5 per cent of the total import bill. During
1999-2000, the production and import of cars stood at 62,500 (32,500 and 30,000 respectively)
falling from 85,000 (39000 and 46000 respectively) due to rising value of Japanese Yen and
slackness in the economy.
* The market conditions for truck and bus industry have deteriorated during the past few years
to a seemingly irreparable extent. The capital and operational cost of commercial vehicles has
increased to an alarming limit while the revenue did not increase correspondingly. The
manufacturing of medium and heavy transport equipment has become an unprofitable
business. Therefore, the capacity utilization of truck and bus industry is less than 7 per cent as
the production is 1000 compared to annual installed capacity of 15,000. One reason is the
increased import of CBU buses in recent years.
* The government has been urging the auto industry to explore ways and means for boosting
exports and criticized the inexorable jump in prices of car in the short span of time, rendering it
beyond the reach of middle class. It is observed that local car market, particularly of small
brands is much bigger but it remained limited due to high prices. For example, 800 CC cars are
30 per cent dearer in Pakistan than in India.
* Like other industries, automobile industry suffers from a high cost of production because of
heavy import component as the plants are merely engaged in assembling rather than
"manufacturing". Escalating input prices such as power and raw materials, mounting taxes, and
high wages relative to productivity add to this cost.
* Our automobile industry does not enjoy economies of large-scale production, contrary to
industrialized nations where output of cars runs into millions resulting in lower cost per unit.
* The industry is far behind the schedule of deletion program as indicated by WTO. It is simply
importing CKD kits to assemble vehicles locally, which means minimum inclusion of local
components. The result is inflated profits for foreign-based manufactures, fewer employment
opportunities for local engineering sector, little technology inflows and inflated market rates for
the locally manufactured automobiles.
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has
been calling for an upward revision of deletion program. The automakers have been asked to
indicate the deletion program and achieve an optimum within four years, coinciding with the
period of the textile quota termination. This places considerable stress on the manufacturers,
especially in times of rising costs.
* Reduction in customs duty on automobiles and spare parts has caused erosion in the viability
and competitiveness of the local industry. The industry's demand for immediate protection
against imports may not be easy to accede. Under the existing covenants of WTO, import duties
are required to be gradually reduced. The all-important aspect in the local manufacturers is the
need to improve the quality of goods to conform to international standards. At the same time,
technological innovations should also be assiduously pursued which alone can ensure
production of superior quality finished goods and high level of capacity utilization in local
industry.
* Transfer of the state-of-art technology from parent companies of Japan and Korea is one of
the most important areas of automobile industry. Unfortunately, Pakistan has not been able to
derive maximum benefits in terms of technical know-how, production technology, quality
control, post-sale servicing, etc, to the mutual advantage of the manufacturer and consumer.
* Smuggling of cars from neighboring countries.
* The expansion of capacity and the distribution of volume of different models and makes within
the auto industry prevent them from realizing economies of scale.
* The rise in new entrants is adding more capacity to the surplus pool threatening levels of the
industry.
Factors stopping growth

* Heavily reliance on imported “Completely Knocked Down” (CKD) Kits.
* Ineffective implementation and monitoring of the deletion program has resulted in lesser
deletion in the car industry as compared to 84 per cent in Tractors and an average 50 per cent in
Bus and Truck manufacturing.
* Tariffs of 35% for import of CKD by the OEMs and commercial importers have eliminated the
attraction for deletion.
* Lack of spare parts market for vendors as they are bound to sell parts to the assemblers only.
* Delays in inspection and approval of parts by the parent company. A part developed locally
has to be sent to Japan or Korea for approval.
* Small size of the market resulting in under capacity utilization. The vending industry, which
comprises 400 units, is operating at just 30 per cent of its capacity.
* Indifferent attitude of the assemblers i.e. a component developed for one assembler is not
accepted by others.
Indian Automobile Industry
Snippets
* India is being recognized as potential emerging auto market.

* Foreign players are adding to their investments in Indian auto industry.
* Passenger vehicles sales crossed the mark of 1 million in 2004-05.
* Automobile industry expert predicts that by 2050 every sixth car in the world will be for
Indians.
* 2/3rd of auto component production is consumed directly by OEMs.
India is the second-biggest market for small cars after Japan. It accounts for 60% of the domestic
market.
Current Scenario
o India represents one of the largest two-wheeler markets in the world, with an estimated size
of 5.4 million units a year.
o India is the two-wheeler capital of Asia with an average of 27 two-wheelers per thousand
people, compared to China's 8 two-wheelers per thousand people.
o India became the fastest growing car market in the world in 2004, growth rate of 20%.
Facts & Figures

It seems that India has finally arrived in the big league of Asian car markets. Steady and
impressive annual growth rate, presence of international automakers, relaxation of foreign
exchange and equity regulations, reduction of tariffs on imports and few others are the
components of its booming auto market. The country has now come to be recognized as a
potential emerging auto market. The perception of foreign investors has changed, everybody
wanting to be here.
For the first time, in the financial year end in 2005, the total sales of passenger vehicles - cars,
utility vehicles and multi-utility vehicles - crossed the one-million mark to touch 1.06 million,
with exports of 166,000 vehicles. Study says that by 2010 India will take over Germany in sales
volumes and Japan by 2012. And by 2050, Indians will buy every sixth car produced in the world.
Apart from serving the domestic market, the auto sector has turned as a sourcing base for the
global auto majors. The auto component market is also in its full swing. As per the research of
RNCOS, one of the leading industry firm, the Indian automobile component industry is
estimated to triple from USD 63 billion to USD 190 billion within a span of six years by 2012.
Indian Automobile Industry Estimation
Estimated turnover USD 12 billlion, plus components revenue USD 3 billion, this is the vastness
of Indian automobile industry. Industry analysts predict this industry to touch USD 13000 million
mark by 2010, a cumulative growth of 9.5% annually. It is said that for every Re 1 spent, the auto
sector returns Rs. 2.24 to the Indian economy.
Cars by Price Range
* Under Rs. 3 Lakhs Maruti 800, Alto, Omni Reva

Rs. 3-5 Lakhs
o Ambassador
o Fiat Palio
o Hyundai Santro, Getz
o Chevrolet Opel Corsa
o Maruti Zen, Wagon R, Versa, Esteem, Gypsy
o Ford Icon & Fiesta
o Tata Indica, Indigo
o Mahindra Bolero
Rs. 5-10 Lakhs
o Chevrolet Swing, Optra, Tavera
o Hyundai Accent, Elantra
o Mahindra Scorpio
o Maruti Baleno
o Toyota Corolla, Innova
o Tata Safari
o Mitsubishi Lancer, Lancer Cedia
o Honda City
Rs. 10-15 Lakhs
o Ford Mondeo & Endeavour
o Chevrolet Forester
o Skoda Octavia Classic & Combi
o Honda Civic & CR-V
Rs. 15-30 Lakh
o Maruti Suzuki Grand Vitara
o Hyundai Sonata Embera, Terracan & Tucson
o Mitsubishi Pajero
o Audi A4
o Opel Vectra
o Honda Accord
o Mercedes C Class
o Toyota Camry
Rs. 30-90 Lakhs
o Audi A6, A8 & TT
o BMW X5, 5 Series & 7 Series
o Mercedes E Class, S Class, SLK, SL & CLS-Class
o Porsche Boxster, Cayenne, 911 Carrera & Cayman S
o Toyota Prado
Above Rs. 1 Crore
o Bentley Arnage, Continental GT & Flying Spur
o Rolls Royce Phantom
o Maybach
Indian Auto Market Growth for the year 2005-06
* The domestic automobile industry sales grew 12.8 per cent at 89,10,224 units as against
78,97,629 units in 2004-05.
* The automotive industry crossed a landmark with total vehicle production of 10 million units.
* According to the Society of Indian Automobile Manufacturers (SIAM), car sales was 8,82,094
units against 8,20,179 units in 2004-05.
* The growth of domestic passenger car market was 7.5 per cent
* Car exports stood at 1,70,193 units against 1,60,670 units in 2004-05.
* The two-wheeler segment, the market grew by 13.6 per cent with 70,56,317 units against
62,09,765 units in 2004-05.
* Motorcycles had the upward march, 17.1 per cent in domestic market touching 58,15,417
units against 49,64,753 units in 2004-05.
* Scooter segment grew by 1.5 per cent, fall at 9,08,159 units against 9,22,428 units in 2004-05.
* Commercial vehicles segment grew at 10.1 per cent with 3,50,683 units against 3,18,430 units
in 2004-05.
* Medium and heavy commercial vehicles managed a growth of 4.5 per cent against 23 per cent
growth in the year ended March 31, 2005.
* Light commercial vehicles sales growth was 19.4 per cent at 1,43,237 units against 1,19,924
units in 2004-05.
* Three-wheelers sales rose by 17 per cent at 3,60,187 units against 3,07,862 units in 2004-05.
Two Wheeler segment as a whole during the year 2004/05 grew by over 15%. This growth has
been due to the Government's initiative on rural roads and better connectivity with major towns
and cities, improved agricultural performance, upward trend of purchasing power in the hands
of rural people.
The two wheeler industry was able to achieve the record performance of crossing 6 million two
wheelers with exact sales standing at 6,208,860 during the year 2004-05. The northward trend
of growth among the two-wheelers is set to continue in the years ahead.
A brief input about the growth of various segment of two-wheelers with the statistics from their
leading manufactures are as follows.
Scooters
2001-02 2002-03 2003-04 2004-05 2005-06

937506 848434 935279 987498 1020013
Though the metal bodied geared scooters have fallen out of favour of the Indian two-wheeler
user their upward trend in growth has been due to rise in the sales of Scooterettes and Motor
Scooters. Bajaj Auto has been able to sell 152,936 units in the year 2004/2005 of two wheelers
which don't include motorcycles. They have shown a negative trend in the two wheeler segment
other than the motorcycles. This goes on to show that Bajaj Auto has lost its supremacy in the
Scooter and moped segment as they have shifted focus to motorcycles.
Motorcycles
2001-02 2002-03 2003-04 2004-05 2005-06
2906323 3876175 4355168 5193894 6201214
Motorcycles as has been mentioned through out this website have become the most preferred
choice among all two-wheeler users. They account for nearly 80% of the total two wheeler sales
in the country. This trend is set to continue as more and more models of this hot set of two
wheelers enter the market. Bajaj Auto one of the largest manufactures of two wheelers in the
country has managed to sell about 1,449,710 units of motorcycle in the year 2004/2005. Hero
Honda which claims to be the largest manufacturer of two-wheeler in the world was able to sell
2.62 million motorcycles during the year 2005/2005. The company also accounts for half the
market in the motorcycle segment.
Mopeds
2001-02 2002-03 2003-04 2004-05 2005-06
427498 351612 332294 348437 379574
Mopeds which were once the entry level options in the two-wheeler, have been replaced by
entry level or price category bikes which provide all the comfort and advantages of a motorcycle
but at an affordable price. Thus it has not come as a surprise that mopeds have shown a
negative growth over the recent years. TVS Company one of the pioneers of mopeds
manufactures of India was able to sell about 2.90 lakh of mopeds during 2005/2006. This trend
is supposed to continue in the days to come, as the motorcycles race ahead other two-wheelers
will find it difficult keep up with the pace of their growth.
Recommendations
Here some proposed suggestions are given to progress the auto industry in Pakistan by taking
some important measures .
* A consistent policy should be declared by the Government every 7-10 years in order to make
the local manufacturer more focused and more certain.
* The current deletion policy and form "S" be maintained and officially announced to lessen
uncertainty created by WTO agreement.
* The duty on parts be increased from 35 percent to 45 per cent to create a gap between CKD
which is also 35 per cent.
* The duty on 10 seater and above 10 Seater van, which was reduced to 60 to 25 per cent
should be increased to 60 per cent.
* Deletion level should be increased specially of high tech and major engineering parts.
* Market expansion measures should be taken which will definitely benefit the industry,
government and general public in terms of employment and price.
* Volume of production should be increased in order to achieve the economies of scale.
Localization should be increased and investments should be made to increase localization.
* Financing options such as leasing and car finance scheme in collaboration with banks and
financial institutions should be extended on a wider basis so as to increase the purchasing
capacity of the buyers.
* The car manufacturers should also encourage the use of CNG as an alternative to fuel in order
to stimulate the demand of the cars despite the rise in fuel prices.
* The government should also keep a close watch on new entrants so as to prevent Foreign
Firms from dumping there vehicles to the Pakistan market
Conclusion
The local automobile industry has experienced impediment and decline in its different segments
as compared to earlier where the industry observed tremendous high growth in terms of
production and sales.
The most recent statistical data issued by Pakistan Automotive Manufacturers Association
explains that the arrival of the imported vehicles and rising interest rates situation has
decelerated the over all sales figures of the automobile industry which is considered as a large
scale-manufacturing sector of economy.
The vast import of used cars has affected demand of locally manufactured automobiles. The
only way forward for the assemblers is either by expansion in their production capacity along
with brand extension or through inclusion of updated and better quality vehicles in their trading
portfolio. However in today’s fast globalizing world changing models, improving fuel efficiency,
cutting costs and enhancing user comfort without compromising on quality are the most
important challenges of the industry. Following international trends, the auto industry in
Pakistan is also quickly evolving and may soon begin materialize the dream of achieving
economies of scale.
The import of used automobiles has considerably declined in the first quarter of the current
fiscal year. This downtrend can be ascribed to uncertain policies, a glut of imported used
automobiles and a saturating auto market. On the back of high demand various vehicles were
imported in the ending months of last fiscal, as a result creating a glut of imported cars. Non-
availability of parts and their unsatisfactory performance on Pakistani roads has somewhat
halted their imports.
Comparing the import of vehicles on a quarter on quarter basis, import of cars was down by 53
percent to 6,571 units in July to September period of 2006, when compared against 13,927 units
in April to June 2006. Import of CBU were up by a 574 percent whereas those of CKD was down
by 62 percent sending a clear message that we might witness a slow down in car production in
the last quarter of 2006.
In terms of market share, Pak Suzuki holds a main lump ensued by Indus Motors. Market share
of Pak Suzuki improved to 55 percent whereas market share of Indus Motors surged to 31
percent on year on year basis.
Industry car sales in 4 months FY07 were up by 7.6 percent to 50,707 units on year on year basis
and were down by 20.2 percent to 10,663 units months on months basis. Further break-up of
the car sales revealed that in 4M/FY07, 27,917 units were sold by Pak Suzuki, 15,629 were
contributed by Indus Motors and the rest by Dewan Motors and Honda Atlas. Pak Suzuki and
Indus Motors whose sales were up on year on year basis were down in double digits when
compared on mo-m. In the month of October 2006, sales of Pak Suzuki were down by 24
percent to 5,741 units whereas sales of Indus Motors were down by 14 percent to 3,333 units.
On the contrary the Pakistani auto market has grown up around 30 percent in the last 10 years.
Almost all major automobile units in Pakistan either are running on double shifts or planning to
go into double shifts to meet the growing demand. This phenomenal growth in demand is
amazing especially in the face of increased financial charges by the leasing or bank financing. It
may be mentioned that over 70 percent of the cars enrooted either through leasing or bank
financing in Pakistan. The industry is required to enhance investment from Rs. 21.63 billion in
2006-07 to Rs. 21.63 billion in 2007-08 for the production capacity of 276,000. Likewise,
for2008-09, the industry has to inject Rs 14 billion in 2008-09; Rs 11 billion in 2009-10; Rs. 450
billion in 2010-11 and Rs 5.20 billion in 2011-12 for incremental car production capacity from
348,000 to 516,000 units.
The lack of long-term auto policy will have a negative impact on the growth of local auto
industry. Help is needed to make Pakistan a global supplier of auto components and embodying
incentives to facilitate research and development.
Import tariffs should be fixed to help promote manufacturing of cars and auto parts locally,
while the government should encourage local and foreign investment for capacity expansion in
order to meet the rising demand. But there should keep a balance between production levels of
vendors and assemblers with continued governmental assistance.

Automotive Industry in Pakistan

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Automotive Industry in Pakistan

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Automotive industry in Pakistan started in 1950 and has gone through different phases1950’s

Segment wise Automobile Manufacturing Units

Cars 7 L.C.Vs 7 Jeeps 2 Truck and Bus 5 Tractor 4 Motor cycle 42

Vendors (400 approx)

Industry operates under franchise and technical cooperation agreement with:

Japan Europe Korea China

In Pakistan the automobile components manufacturing industry consists of mainly units

Evolution of Automobile Industry in Pakistan

Indigenization in :- i) Bedford trucks /

buses - 40% approx.

ii) Cars - 20%.

Vauxhall, Ford Prefect, Ford Cortina and Dodge Dart cars.

(Privatization & entry of private sector).

• Truck and Bus 5

• Vendors (400 approx)

Industry operates under franchise and technical cooperation agreement with:

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The Beginning of the Pakistan Automobile Industry

Pakistan is basically an agrarian economy since its independence. In 1947, agriculture

Period of Progressive Manufacturing

Following the progressive manufacturing period, nationalization of industries under Economic

PERFORMANCE UNDER GOVERNMENT CONTROL

Analysis Of The Automobile Industry

Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) was formed in

PRODUCTION (P) & SALE (S) OF VEHICLE FROM 1995 ONWARD

LCV & 4X4

Contribution of Cars and LCV’s to Pakistan’s Economy

LIST OF LOCALLY ASSEMBLED AUTOMOBILES

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PRICE LIST OF CAR IN PAKISTAN

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LOCALLY ASSEMBLED MOTORCYCLES PRICE LISTS

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Buses and Trucks in Pakistan

Market Size (U.S. Dollars, in Millions)

OVERVIEW (TRENDS AND HIGHLIGHTS)

Vehicle Production in Units

Source: Pakistan Automotive Manufacturers Association

*Light Commercial Vehicles

Source: Ministry of Commerce, Pakistan

FY-1997 FY-1998 FY-1999 FY-2000 FY-2001 July-Dec

*6 months data from July-December Source: Federal Bureau of Statistics

Market share of Japanese brands (Assembled in Pakistan)

Source: Pakistan Automotive Manufacturers Association

Market share of non-Japanese brands (Assembled in Pakistan)

Source: Pakistan Automotive Manufacturers Association

Source: Pakistan Automotive Manufacturers Association

Market Share of Buses and Trucks

Dry Cargo Carriers (with Trailers) Nos Capacity

Water Bowzers Nos (Lits)

1951, 1981, 1998, and 2003 (Estimated)

Punjab Sindh NWFP Baluchistan FATA Islamabad

FATA: Federally Administered Tribal Area Source: Population Census Organization

NWFP: North West Frontier Province

*Estimated Source: National Transport Research Center

NEW BUS TRANSPORT NEEDS BY PROVINCE

Current Bus-Franchise Operation in Punjab

Horse Power (hp)

Total Buses: 798

Demand (under process):

Procedure for Grant of Franchise Buses & Incentives In Punjab

o Advertisement for bids

Current Urban Transport Scheme (UTS) in Sindh

* There is a current shortfall of 5000 long buses