Automobile Industry of Pakistan †an Overview Essay

The self-propelling manu incidenturing rightly prides itself on organism recognized as the m new(prenominal) of solely industries. In its folds it carries umpteen disparate kinds of vehicles to provide mobility to people and goods. While they may appear to be simple-minded machines, their design and manufacturing ask much deeper roots in whole the cognize technologies. In-depth know leadge 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 demesne, by focusing on a single product the automobile. This and accordingly provides an luck to produce a large fare of goods and services for consumption of the inviolate international community. Use of the word mother for automotive pains is wherefore the most appropriate description to define the nature and importance of the diligence. In recent grades, we sacrifice witnessed that the industrializat ion of South East Asian countries greatly depend on the phylogenesis of their automotive persistence. Similarly, automotive industry acted as a catalyst in the everyplaceall harvest of the industry in Japan and Koreas and the consequent wellbeing of their citizens.It is indeed heartening that the mother has at one time again smiled at Pakistan. Fortunately the be 3 forms open witnessed phenomenal product in the industry in terms of technological advancements and deed/sale volumes with the topical anesthetic confine rising as mellowed as 90%. The industry is already employing 120,000 people, contri provideding 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 disgorge of products including motorcycles, trucks, buses and cars of premier Japanese and Korean brands at internationally competitive prices which has only become possible callable to local surfeits and approachability of super productive and inexpensive human resources. An automobile has over 2000 components and separate out of which the assemblers usually concentrate on the manufacturing of teeny-weeny but critical parts while the remaining parts atomic human body 18 supplied by the sellers and the subcontractors.In Pakistan the automobile component manufacturing industry consists of mainly units producing original components for assembly under delegation program and units producing reconditioned and original components for local use. These units are in triple types which include the original equipment retracers, independent equipment manufacturers and the ancillary (auxiliary) industry producing small parts and non-automotive items.There are more than 800 vendors in the country with a total investment of over Rs.8 billion they are engaged in the manufacturing of original components for the assembly operation under the delegation 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 heads, 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 crinkle conditioners.Critics say that the local vendor industry though still in the subprogram of cultivation, have not achieved the delegation targets by producing low look components which are not acceptable by the local assemblers, it is express that the Pakistan connector of Automotive Parts & Accessories which represents the auto parts manufacturers have not in a way been fully able to contribute its share to the ripening of this sector. The vendors on their part however put the blame on the insurance insurance 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, as it was pointed out, have started manufacturing wheel drums locally while Suzuki is still complain about the quality of silencer it received from the local vendors. In the humanity dole out, Automobile Sector is one of the largest segments. It is the major driver of economical growing and business activities in a country.It puts multiplier impacts on the economy. Day-in, day-out around 200,000 vehicles plunk off the introductions assembly lines with car as the prevalent segment of the industry. Evolution of Automobile Industry in Pakistan Automotive industry in Pakistan started in the 1950 and has gone through different phases from be ing a private sector industry in 1950 60s, and becoming a disposal giveled industry in the 1970s thanks to Mr. Bhuttos Nationalization policy, and then reverting back to the private sector from 1980 onward.Currently in Pakistan we have a total of 67 Automobile Manufacturing Units (A. M. U) which include o7 Car A. M. Us o7 Light Commercial Vehicle A. M. Us o2 Jeep A. M. Us o5 transport and Bus A. M. Us o4 Tractor A. M. Us o42 Motorcycle A. M. Us There are approximately 400 vendors doing businesses in the automobile sector. All the Automobile Manufacturing Units in Pakistan are operating under agreement and licensing from countries like Japan, Korea, China and well-nigh from the European Union.Pakistans automobile sector has been registering high harvest judge for the persist four to five years due to the countrys business friendly policies along with lower tariff rates, persistent process in GDP, and per capita income. Globally considered as the mother of all industries, th e automobile industry in Pakistan is unshakable evolving as a robust industry. nigh sub-sectors of this fast growing industry, like motorcycle work, have already achieved economies of eggshell.The level of motorisation in the country has too been rising over the years. In 1998-99, it was three cars per 1000 persons, which has significantly increase to 11 cars per 1000 persons in year 2005-06. The indigenous growth in output signal of motorcycles increased by 25 per cent during year 2005-06, reaching to an all-time high of 520,124 as compared to 106,797 units in the year 1996-97, which accounts for around 380 per cent increase in motorcycle production during the last nine years.Similarly the production of trucks as well as that of buses also saw 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, recording 51 per cent increase in production. In the eluding 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 industry has achieved a phenomenal growth of 50.2 percent in Fiscal Year 2004-05 and increased competition has led to the introduction of innovative products as well as a worsening in financing termss. Compared with Pakistan, India has a strong engine room base and has successfully created a sizable capacity for production of vehicles. It enjoys a clear brim 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 purposes and best practices.India is already the second largest two cyclist 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.The two segments of the industry namely Car and Motorcycles have shown remarkable growth over the last five years. The growth in domestic market of cars has risen from 40,601 in year 2001-02 to 126,817 in year 2004-05, which is expected to cross 150,000 units during year 2005-06. This growth is attributed mainly by car financing schemes, improved liquidity locating of certain class as a result of economic growth indicators and other monetary measures. The motorcycles have also shown marvelous growth due to new entrants.The new entrants with fair competition have brought about the availability of cheaper ve hicles in the domestic market. Vendor Industry This industry has the potential for development of entire engineering sector. Development of vendor industries in return assures move out 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 tires, sheet metal parts, mirrors, gaskets, engine valves, camshafts, oil pump gears, pistons, radiators, seats, dashboard, and axles. The starting of Pakistans Automobile Industry When Pakistan came appeared on the map of the world, there were incomplete 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. premiere menstruation 1950 1964 (Start from the Scratch) First serious effort by government to develop the industry and engineering sector in particularly was observed in 1950s when a six-year plan (First Development Plan) was drafted to guide government investment in growing the infrastructure. For auto industry, to overcome the initial difficulties, the government, besides evolution infrastructural facilities established the Pakistan industrial Development Corporation (PIDC) in 1950.The main objective of PIDC was to play the pioneering type 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 resulted in growth of the industrial sector recording 56. 62 % growth of the manufacturing sector from year 1949 to 1955. Investment in the automobile industry in Pakistan started in the middle 1950s when Kandawalla Industries established its units for assembling buses and trucks, the callers name was subsequently deviated to NayaDaur Motors.National Motors took the indigenization when it came out in the 1960s and was said to have reached supra 80% delegation 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 be worth mentioning here that the same blueprint is said to still be in use in Iran till right away but under their own brand name.Second Period 1964 1972 (Progressive Manufacturing) strength of the industry and high demand of the products attracted new entrants whereas the existing players started producing in surge quantities. This mass production that started i n 1964 resulted in the original ever flowing 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 bestow more and more complicated parts in small steps. gibe to the planning then done 100% local manufacturing was to be achieved in seven to ten years. Unfortunately, this consequence did not last long as the projects underinterpreted proved to be over ambitious that eventually failed. Clearly the concept of progressive manufacturing has not added much to technology, self-reliance or economy. For example, as against the targets bound of manufacturing 100% of local contents in maximum 10 years, actually achieved delegation in eighteen years is 45. 78% for trucks & buses, 43. 17% for trucks & buses engines, 16. 50% for 44 jeeps and zero percent for cars.Furthermore, no new units for manufacturin g passenger cars, 44 vehicles, LCVs, buses and trucks were established under this concept, but still a few(prenominal) new units for producing tractors, jeeps and specialized vehicle were established. New units established were Atlas Honda, Khawaja Autos, genus Rana Tractors, Jaffar Industries, and Bela Engineers. A more market oriented approach was adapted by Honda motorcycles and Vespa scooters during this period, as they introduced light motorcycles for the first time in a market dominated by enceinte motor bikes like BSA, walk on air and Lamberetta scooters.Third Period 1973 1987 (Nationalization of Industries) Following the progressive manufacturing period, communisation of industries under frugal Reforms order had a profound impact on automobile industry in Pakistan. In early 1972 under Martial Law Regulation, the presidency took over the control of 32 industrial units, including eight automobile plants, under the officially appointed Board of Industrial Management wit h the Minister for yield as its Chairman. The units taken over by the organisation were iron and steel, heavy engineering, heavy chemicals, assembly and manufacturers of motor vehicles.The companies gone under nationalization include oWazir Ali engine room oSind Engineering oHyesons Mack Trucks oAli Autos oAwami Autos oRana Tractors oMillat Tractors oHaroonInd/Karachi Autos oRe globe Motors oJaffer Trailer Developers oGhandhara National Motors oKandawala Industries oNayaDaur Initially, the guidance 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, 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. ecesi s 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 create in 1973 under the administrative control of the Federal Ministry of Production.It was a major public industrial conglomerate of 15 companies including four go ventures. For the first time in Pakistan emphasis was given to develop the nationalized units under local manufacturing facilities and the development of parts in an organized manner and the system of standardization, regulations and supervise was established. This required 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 unorganised sector were channelized 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 make progress on a wide front.During the year 1973-74, large scale manufacturing sector achieved a growth rate of 7% as compared to 11. 8% achieved during year 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, Pick-up, Vans and Jeeps) and Isuzu Trucks & Buses in the public sector.Awami Autos signed a colligation Vent ure 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 skirt 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 interlinking and Heavy Foundry and Forge Projects. Subsequently, the remaining 10 projects under the PIDCs control were also transferred to the Mineral Development Corpora tion. During the year 1972-73, the PIDC-managed projects and companies produced goods worth Rs. 470. 5 million as compared to Rs. 446. 6 million in 1971-72.Fourth Period 1987-95 (Privatization on Industries) The policy of de-nationalizing public sector units was adopted once the change in government took place. Privatization brought in foreign companies. This resulted in a number of joint ventures. Due to these ventures, Pakistan auto industry entered into assembly/progressive manufacturing 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, NayaDaur which after discontinuation of AMC-Jeep dealership had become a mere vendor to Pak Suzuki (assembling Suzuki Jeeps) was sold to Tawakal group. Under the Government de-nationalization policy NayaDaur 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 to foreign investment.Although, process is on but still many object that this process is not crystal clear and has many defraud comings. Major Players in Pakistans Automobile Industry oPak Suzuki Company Ltd. oSuzuki Motorcycles Pakistan Ltd. oAtlas Honda Ltd. oIndus Motors Compay Ltd. oDewan Farooque Motors Ltd. oDawood Yamaha Ltd. oSigma Motors (Pvt. ) Ltd. oHinoPak Motors Ltd. oGhandhara Industries Ltd. oSind Engineering Ltd. oVPL Limited. oMaster Motor Corporation Ltd. oAl-Ghazi Tractors Ltd. oMillat Tractors Ltd.