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Can Pakistan become a hub of auto exports?

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A Pakistan-Chinese automotive joint venture, Master Changan Motors (MCM), plans to turn its $136 million complete knock-down (CKD) assembly plant in Karachi into a hub of export for the Chinese right-hand-drive cars to the regional countries. MCM is the only joint venture where a Chinese automotive manufacturer has actually invested capital in the project whereas most Chinese Original Equipment Manufacturers (OEM) interested in exploring their chances in Pakistani market are preferring ‘technical cooperation’ with their local partners.

Established back in 2017 as a 70:30 joint-venture between Pakistan’s Master Group and China’s Changan Motors, MCM has the capacity to assemble 30,000 units a year. The company plans to enhance this capacity to 50,000 units. The company, which started by producing two pick-up trucks and a multi-purpose vehicle in 2018, has so far sold a staggering 17,000 units of Changan’s compact sedan Alsvin it had launched in December last year. “Ours is the first green-field project launched under the 2016/21 Auto Industry Development Policy under the umbrella of China-Pakistan Economic Corridor 2.0,” Danial Malik, MCM CEO, told this correspondent in an interview.

“Since China is a left-hand-drive market, Changan was looking to develop a right-hand-drive manufacturing base to grow outside the country and that is the opportunity we had offered them,” Malik said and added, “Changan is the only Chinese carmaker to have invested equity in a JV with a Pakistani company.” According to him, Bangladesh and Sri Lanka could be the potential markets for MCM vehicles.

“Other Chinese automotive companies have also been exploring markets and expanded in other countries as market growth in China is stagnating for some years. Exploring the right-hand-drive markets is one strategy the OEMs from China are pursuing. For example, DFSK went to Indonesia to set up its plant to produce right-hand-drive vehicles and another Chinese carmaker bought Malaysian Proton for the same reasons. Changan has chosen Pakistan.”

“Changan, a state-owned company, agreed to our proposal to set up a plant in Pakistan to venture into other regional markets owing to close Sino-Pak relationship strengthened by the multi-billion-dollar CPEC initiative.” But, he hastily pointed it out, “our near-term priority is to first create and meet the demand within Pakistan before we start exporting to the other regional countries. Moreover, we must localise our vehicles for cost-effective production in the next 2-5 years before venturing into export markets.”

In recent years, China’s automobile makers have evinced ‘significant’ interest in Pakistan’s car market, launching various brands offering better technology and more safety features than their well-entrenched Japanese competition and new Korean rivals give to consumers and that too at accessible or discounted prices. Attracted by the tax incentives offered to new automakers in the 2016/21 policy, at least four Chinese firms are said by the Engineering Development Board to already have set up shop in Pakistan in collaboration with their local partner companies to sell their light commercial vehicles, passenger cars, crossovers and SUVs. Few others are also looking to bring their brands with the help of local firms. But most of them have chosen to let their local partners assemble their brands under the ‘technical licenses’. SAIC Motor Corporation, another state-owned Chinese automotive company, is also said to have teamed up with JW SEZ to make equity investments in a CKD assembly plant to produce popular British brand — Morris Garages.

“The answer to the question why Chinese automakers aren’t making equity investments in Pakistan can be found in the policies of the government,” Nabeel Hashmi, a leading auto vendor and exporter of auto parts from Lahore, said. “Under CPEC, our official focus has always been on the textile sector. We never tried to explore the possibility of cooperation with Chinese investors in the area of manufacturing capital goods.”

An Engineering Development Board official said the Chinese car companies are exploring the Pakistani market and would start investing capital in a big way here once they are able to wean away customers from the expensive Japanese and Korean models by offering them better quality vehicles and driving experience, and lower prices. Secondly, some Chinese OEMs may need to increase their CKD production capacity before entering Pakistan, he said.

Danial Malik said it was only recently that China’s automotive industry had realised how big a car market it has lost in the developing countries to their Japanese and Korean competition. “Now they are growing out of China and exploring potential overseas markets. And to beat their competition they are offering state-of-the-art technology at very accessible prices to consumers. It will take some time but, the customers will eventually become used to their products and shift to the Chinese brands once they have experienced them. Just look at our Alsvin: no other locally assembled sedan can compete with the safety and technological features it offers to the buyers at such low prices. Many features like the sunroof we have given in this sedan are available only in cars priced above Rs4m. And we pre-booked 17,000 cars in a matter of weeks!”

The MCM CEO said his company also planned to start production of electric cars in Pakistan. But, he said, “we would prepare our feasibility once the government takes a final decision on the demand of the Japanese manufacturers for the same incentives given in the recently approved EV policy for their hybrid cars. “If that happens, it will discourage adoption of the cleaner, most-efficient EV technology in the country. It will not be good for the internal combustion vehicles either,” he concluded.

Dawn News. (2021, February 15). Can Pakistan become a hub of auto exports? Retrieved from https://www.dawn.com/news/1607375/can-pakistan-become-a-hub-of-auto-exports

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