Study on Automotive Sector

An Expert's View about Non-Automobile Transport Equipment in Pakistan

Last updated: 20 Apr 2011

Sector Status:

The Automotive sector in Pakistan consists of a number of assembly units for cars & light commercial vehicles (LCV), trucks & buses, tractors and motorcycles. These assemblers are supplied with localized parts by a well-established auto parts industry. As a whole, 8 assemblers exist in the car & LCV segment, 7 in truck & bus segment, 4 producing tractors and around 50 assembling motorcycles. In the downstream sector, some 400 organized and 800 small unorganized auto parts manufacturers supply parts to the assemblers and replacement market. In the automotive sector, car/LCV and truck/bus segments a recession is impacting sales, while tractor and motorcycle segments are experiencing tremendous growth. The downstream autoparts industry has an overall upward growth trend. 

Cars & LCVS
Pakistan’s eight auto and LCV assembly facilities have an annual capacity of 315,000 units, but are currently producing around 140,000 vehicles per annum. The slump in car/LCV industry is attributed to low market demand resulting from an economic slow-down, political and security uncertainties and high interest rates on and vehicle financing loans (currently around 22%). The low deletion level (the level of locally produced parts required by the government) (i.e. 40%) in car/LCV segment is a cause of high vehicle prices that too contribute to the reduced demand for these vehicles. Some 12,000 new and reconditioned cars & LCVs were also imported into Pakistan in 2009-10. Among the total car/LCV units produced in Pakistan, over half are Suzuki vehicles, one-third Toyota, 10% Honda and 4% Daihatsu. Brands such as Defender and Master have only a 1% share. 

Trucks & Buses
The present production of trucks & buses in Pakistan country stands at 4,000 units against an installed capacity of 30,000 units per annum. This low capacity utilization is attributed to limited demand for medium-to-heavy duty vehicles and high capital & operational cost for assemblers. Besides domestic production, some 3,500 trucks & buses were imported in 2009-10. Hino dominates this market segment with a 63% share of the industry, while UDNissan, Master and Isuzu follow with 12-13% shares each. 

Tractors
Though other segments of the automotive sector are experiencing a down-turn, Pakistan’s tractor industry is growing. The industry produced over 70,000 tractors and registered 27% growth during 2009-10. The favorable size and growth of tractor industry is attributed to mechanization trends in agriculture; strong localization of tractor OEM parts (i.e. 92%); tax exemptions for the tractor industry; and occasional subsidy schemes by the Government. Due to strong domestic demand, some 13,000 tractors had to be imported in 2009-10. Messy Ferguson is the industry leader with a 56% share of overall production, while Fiat stands as the sole challenger with a 44% industry share. 

Motorcycles & Tri-Wheelers
Over 50 OEMs are engaged in production of motorcycles and rickshaws in Pakistan. The industry players produce three Japanese brands (Honda, Yamaha and Suzuki) and around 47 local brands, many using Chinese technology. The annual capacity of the industry is 1.8 million units, while current production stands at 1.1 million units per annum. Industry growth of 33% is credited to capacity enhancement by industry players; launches of low-cost local brands; and abundant usage of motorcycles in triwheel rickshaws. Due to sufficient domestic production, the import of motorcycles is nominal, i.e. 1,200 units per annum. Honda is the industry leader with a 44% share, while Yamaha and Suzuki follow with 11% and 2% shares respectively. Low-priced local brands with Chinese technology hold 43% of the market.  U

Automotive Parts & Accessories
The supply of auto parts and accessories to OEMs and the large replacement market is catered to by almost 400 organized and 800 small unorganized manufacturing units. The industry is mostly concentrated in Karachi, Lahore and Gujranwala. The segment is growing at the rate of 20-25% per annum. The overall value of auto parts and accessories imported by local assemblers and commercial importers stand at $850 million a year.  U

Investment Opportunities
Opportunities for foreign investors include establishment of manufacturing units for automobiles or automotive parts; acquisition of or joint ventures with existing assembly plants, joint ventures or technical & financial collaboration for revival of sick units; establishment of conversion centers and possible technical collaboration with future ventures.

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Posted: 19 April 2011, last updated 20 April 2011