PRESENTATION ON

AUTO INDUSTRY
DEVELOPMENT PLAN-II
(FY 2012-13~2016-17)
Engineering Development Board
Ministry of Industries
 Sequence
2

 Past Policy Interventions

 Performance of Automotive Sector in Pakistan
 Implementation of AIDP
 Reasons for non-implementation of AIDP
 Tariff vs. Protection
 Protection vs. Performance
 Global Trends
 Local Trend
 Used car imports
 Consideration under AIDP II
 Road Map for future
 Features of AIDP-II
 Recommendations
 3 Past Policy Interventions
•
Policy Initiatives st
Deletion Policy replaced with Tariff Based System (TBS) w.e.f 1 July 2006 wherein :
o Deletion levels frozen at a level achieved up to June 2004;
o Further deletion linked to economic competitiveness
o Import duty @ 32.5% for import of CKD kits (Non localized parts/components)
o Import duty @ 50% for import of localized parts/components,

• AIDP followed TBS in 2007 providing a Five Year Pre-announced Tariff Plan (2007-2012)
to safely steer the auto industry in the post deletion period , achieve indigenization of critical
parts/components and incentives for new entrants.

• Other policy initiatives taken:

o The Government removed 5% Federal Excise Duty (FED) in budget 2009-10 and the
benefit was passed on to the consumers through reduction in prices,
o 1% Special excise duty removed in budget 2011-12
o Sales tax reduced from 17% to 16% (2011-12)
4

Performance of Automotive Sector in Pakistan

 5 Performance of Automotive Sector
 Showed significantly growth during the period 2003-05 to 2006-07.

 Global recession in 2008-09 had an adverse impact on the growth trend.

 Production declined from 1.3 million units in 2007-08 to 0.84 million units in 2008-09
in the car segment.
 Similar decline noticed in other segments except the Tractor industry
 The car, LCV, & motorcycle industry now in the revival stage beginning 2009-10.
 Trucks & Bus industry could not revive and still in declining state
 Production of all vehicle except 2/3 wheelers reached 0.23 million units in 2011-
12.
 Production Performance
6
2001-02 – 2011-12

Product 2001-02 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Cars 42,679 170,487 176,213 164,870 84,814 121,790 133,972 154,255

Jeeps/LCV 564 2,472 3,298 1,590 932 1,172 883 451

Pick-Up and 5,900 19,152 19,672 21,354 16,160 15,768 19,142 20,928
LCV
Trucks/Prime 1,134 4,533 4,593 5,271 3,304 3,727 2,957 2,877
Movers
Buses 1,086 825 1,073 1,160 707 716 577 698

Tractor 23,801 49,439 54,529 54,397 59,684 72,989 72,261 48,895

SubTotal 75,164 246,908 259,378 248,642 165,601 216,162 229,792 228,104

Motorcycle 137,273 751,379 839,850 1,058,109 976,842 1,380,184 1,600,781 1,570,205

Total 212,437 998,287 1,099,228 1,306,751 1,142,443 1,596,346 1,830,573 1,798,309

 7 Company wise Market Share (%)
Manufacturers 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Pak Suzuki Motors 62 62 52 52 56 62

Honda Atlas 8 8 12 10 10 7

Toyota Indus 24 26 34 37 33 31

Dewan Farooq (Hyundai) 5 5 2 1 0 0

Nissan 0 0 0 0 0 0

Nexus Automotive 0 0 0 0 0 0

Raja Motors 0 0 0 0 0 0
 8 CC wise Market Share (%)

Engine cc wise 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1300-1600 cc (2000cc Diesel) 32 31 48 50 46 43

1000 cc 30 29 20 19 19 19

800 cc 37 40 32 31 35 38
 9
Import of Cars (Used or New)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Cars up to 1000cc 19,272 14,108 7,596 3,129 4,565 5,248 24,778

From 1001 to 1300 4,131 2631 1301 502 314 1,282 8,040

From 1301 to 1500cc 5,976 2,882 2,779 508 783 2,477 18,392

From 1501 to 1600cc 991 919 45 18 11 11 33

From 1601 to 1800cc 947 546 561 136 503 1,324 4,590

From 1801 to 3000cc 2,267 2,517 1,462 238 61 89 176

Above 3000cc 445 267 163 161 36 46 112

Jeeps (4x4) 9,251 3,097 2,214 870 309 284 852

Total 43,280 26,967 16,121 5,556 6,582 10,761 56,973

Source :FBR

9
 10 Impact of used cars import
Import of used cars Local Production
Possible Brands Affected
2011-12 2011-12

Suzuki (Mehran, Bolan, Alto, Cultus) &

Cars up to 1000cc 24,778 87,956
Cuore
Suzuki Swift & Liana) &
From 1001 to 1300 8,040 14,551
Honda (City)

From 1301 to 1500cc 18,392 Corolla (XLI,GLI )

46,352
From 1501 to 1600cc 33 Corolla (GLI Auto & Altis)

From 1601 to 1800cc 4,590 5,396 Honda (i-VTEC & VTI- Oriel)

From 1801 to 3000cc 176 Nil Corolla ( 2.0D)

Above 3000cc 112 Nil

Jeeps (4x4) 852 451

Total 56,973 154,706

Auto Industry Development
Programme - I
 12 Implementation status of AIDP - I
 Five year tariff plan not implemented during last three years as
under:
• 2009-10: Not implemented on the request of PAMA
• 2010-11: Deferred by the Government
• 2011-12: Status quo maintained by the Government
 Actual production remained around 150,000 against projected
500,000 cars by 2011-12;
 No new investment made in new plants except recent addition of
FAW.
 Critical components as projected under AIDP not localized
 13
Reasons for Non implementation of
AIDP - I
 Ambitious target of achieving volumes of 500,000 car;
 No consensus achieved on indigenization of critical
components;
 Brand extension for inclusion of updated and better quality
vehicles;
 Closure of two units with no choice available to consumers
 No new investment made in new plants except recent
addition of FAW.
 14 Tariff vs. Protection (Concessionary regime)
CKD Tariff Rates Under SRO 656 (I) / 2006
Non –localized Localized parts if
parts (Incentive) imported(Protection)

Cars : 32.5% 50%

Light Commercial Vehicles (LCVs) not 20% 45%
exceeding 5 Tons:
Motorcycles 15% 47.5%
Auto Rickshaw: 20% 50%
Heavy Commercial Vehicles (HCVs) 20% 50%
exceeding 5 Tons :
Buses (Non CNG) : 5% 35%
Buses (CNG) : 0% 35%
Tractors : 0% 35%
 15 Tariff vs. Protection (Concessionary regime)
Tariff Rates Under SRO 655 (I) / 2006
Vendors / or for in-house manufacturing of parts by
assemblers allowed import of:

o Raw materials --- ZERO%

o Sub-components --- 5%
o Components --- 10%
o Sub-assemblies --- 20%
 16 Protection vs. Performance
 Protection in component sector did not work well in general as it helped only
the basic components sector to grow domestically, with most of the critical
components still being imported
 Auto sector in-spite of protection policies not yet competitive
 No new investment in the industry particularly in car segment
 Creation of a monopolistic situation.
 Lack of standardization and safety standards
 Further indigenization not encouraged by OEMs making Pakistan a net
importer (50% components still imported)
 Development of vendors to become part of global supply chain and achieve
economies of scale not on OEMs agenda
 No new innovations and introduction of new technologies
 17 Global Trends
 The industry is concerned with consumer demands for styling, safety, and
comfort; and with labor relations and manufacturing efficiency.
 Changing models, improving fuel efficiency, cutting costs and enhancing user
comfort without compromising quality are the most important challenges of the
auto industry in a fast global world.
 The shift of consumer preferences towards hi-tech, fuel-efficient, environment-
friendly vehicles,
 Attract consumers with introduction flex-fuels such as ethanol and LPG/Natural
gas
 Vehicle retirement and replacement schemes
 Financing schemes by the OEM’s or dealers
 Global mergers and relocation of production centers to emerging developing
economies
18 Local Trend- Stagnation
The local Auto industry has stagnated in terms of :
 Heavy protection of technologies that have been developed
in the country resulting in Stagnation in terms of technology;
 Introducing newer technologies
 Market Expansion
 Limited or non existent options for consumers
 Price stabilization
 Improvement in Quality Standards
 Financing Options
 Old vehicle replacement
19 Consideration under AIDP -II

 Switching to newer technologies

 Increase capacity utilization

 Price rationalization

 Improvement in Quality Standards

 Financing Options

 Vehicle Replacement Scheme

 Consumer Rights Sensitization

20 Road Map for future
 To make the auto sector competitive by gradually reducing
protection

 Create global competiveness

 Integrate with global supply chain

 Encourage local assembly operations against import of CBU’s

 Acquire newer/upgraded technologies

 Enhance localization to off set the impact of devaluation

 Assist in Job Creation

 21 Features of AIDP-II
 CBU Tariff slabs for cars to be reduced to 3 or 4 slabs

 Across the board reduction in CBU rate of duty besides withdrawal of Regulatory Duty @
50% on cars exceeding 1800cc.

 Reduction of duties on all range of motorcycles from 65% to 50% .

 CKD rates of motorcycles reduced to 10% for up to 250cc.However in order to induce local
manufacturing of Electric bikes/Mopeds and high tech higher cc Motor bikes ,the CKD rate is
proposed at 5% .

 Reduction in CBU rate of customs duty for ‘Other Vehicles’ (Truck, Buses, Prime Movers etc) so
as to increase competitiveness in the local industry, while maintaining same tariff rates for CKD
parts / components thereof.

 Various schemes for import of used vehicles need to be revisited, so as to circumvent misuse
thereof by commercial importers & non-entitled persons,
22 Recommendations

Auto Industry Development Programme - II

 37 Road Map of AIDP-II
2 & 3 Wheelers % Growth rate
3,500,000

3,000,000 2,929,755

2,547,613
2,500,000
2,215,316
2,013,924
2,000,000 1,830,840
1,600,781 1,570,205
1,500,000 1,380,184

1,000,000

500,000 -2%
41% 16% 17% 10% 10% 15% 15%
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
-500,000
 24 5 Years Tariff Plan under AIDP-II
2-3 WHEELERS INCLUDING ELECTRIC & SPECIALIZED
BIKES, MOPEDS, QUADS, ETC
Present
Description 2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
CBU 65% 50% Same rate shall continue for next four years
(50)
CKD TARIFF RATES
Non Localized Parts 15% 10% Same rate shall continue for next four years
(10)
Localized Parts 47.5% 35% 35% 30% 30% 30%
(25) (25) (20) (15) (10)
INPUT MATERIALS FOR PARTS MANUFACTURING UNDER SRO 655(I)/2006
Raw Material 0% 0% Same rate shall continue for next four years
Sub Component 5% 5% Same rate shall continue for next four years
Component 10% 7.5% Same rate shall continue for next four years
Sub-Assembly 20% 10% Same rate shall continue for next four years
 25 Road Map of AIDP-II
Passengar Cars %growth rate LCV LCV,s (% growth rate)
350,000
15%
258,680
300,000
224,93915% 33,444
204,000
250,000 10% 29,082
187,000
175,000 5%
5% 25,289 21%
200,000 154,000
139,000 5% 23,000 11%
18% 22,000
150,000 1% 21,000
20,000 10% 10%
17,000 10% 266,556
10% 12%
229,598
100,000 44% 199,650
181,500
165,000
150,000
122,000 134,000
50,000

0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
 26 5 Years Tariff Plan under AIDP-II
CARS
Present
Category 2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
Up to 1000 cc 50 to 55% 50% Same rate shall continue for next four years.
(40)
1001 to 1500cc 60 % 55% Same rate shall continue for next four years.
CBU
(50)
1501cc to 1800cc 75% 65% Same rate shall continue for next four years.
(60)
100% + 90% Same rate shall continue for next four years.
Above 1800cc
50% RD (80)
27.5% 27.5% 27.5% 25% 25%
CKD Non-Localized 32.5%
(20) (20) (20) (20) (20)
CKD
40% 40% 40% 35% 35%
CKD Localized 50%
(35) (30) (30) (25) (20)
Raw Material 0% 0% Same rate shall continue for next four years.

INPUT Sub-Components 5% 5% Same rate shall continue for next four years.
MATERIALS Components 10% 10% Same rate shall continue for next four years.
Sub-Assemblies 20% 20% Same rate shall continue for next four years.
Above proposals are subject to review on used car policy
 27 5 Years Tariff Plan under AIDP-II
LIGHT COMMERCIAL VEHICLES
Description Present
2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
CBU of GVW not 60% 50% Same rate shall continue for next four years
exceeding 5 tons (50)
CKD
Non Localized Parts 20% 20% Same rate shall continue for next four years
(20)
Localized Parts 50% 40% 40% 40% 35% 35%
(35) (30) (30) (25) (20)
Raw Material 0% 0% Same rate shall continue for next four years

Sub Component 5% 5% Same rate shall continue for next four years

Component 10% 10% Same rate shall continue for next four years
(5)
Sub-Assembly 15% 15% Same rate shall continue for next four years
(20)
 28 Road Map of AIDP-II
Tractors % Growth rate
120,000 112,736
102,487
100,000 93,170
84,700
80,000 77,000
73,000 72,261 48,895

60,000

40,000

20,000

22% -1% -32% 55% 10% 10% 10% 10%

0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

-20,000
 29 5 Years Tariff Plan under AIDP-II
AGRICULTURAL / FARM TRACTORS
Description Present
2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
CBU 0% 10% Same rate shall continue for next four years
(0)
CKD TARIFF RATES

Non Localized Parts 0% 0% Same rate shall continue for next four years

Localized Parts 35% 30% 25% 20% 15% 15%

(30) (25) (15) (10) (5)
INPUT MATERIALS FOR PARTS MANUFACTURING UNDER SRO 655(I)/2006

0% 0% Same rate shall continue for next four years

Raw Material

Sub Component 0% 0% Same rate shall continue for next four years

Component 0% 0% Same rate shall continue for next four years

Sub-Assembly 0% 0% Same rate shall continue for next four years

 30 Road Map of AIDP-II
Trucks Buses
4000

% growth rate
3500
577
3000
704 710 711 718
698 700
2500

2000 -19% 21% 0.3% 0.6% 0.9% 0.1% 1%

1500 2957
2877 3000 3010 3020 3022 3050
1000
-21% -3% 4% 0.3% 0.3% 0.1% 1%
500

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
 31 5 Years Tariff Plan under AIDP-II
PRIME MOVERS/ RIGID TRUCKS
Description Present
2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
Prime Movers CKD (Non Localized) 10% 5% Same rate shall continue for next four
up to 280 HP (5) years
CKD (Localized Parts) 35% 25% 25% 20% 20% 20%
(20) (20) (20) (15) (10)
CBU 30% 25%(25) 25%(25) 25%(20) 25%(15) 25%(10)
Prime Movers CKD (Non Localized) 0% 0% Same rate shall continue for next four
above 280 HP (0) years
CKD (Localized Parts) 35% 30% 30% 25% 25% 20%
(20) (20) (20) (15) (10)
CBU 15% 15% Same rate shall continue for next four
(10) years
Rigid Trucks CKD (Non Localized) 10% 5% Same rate shall continue for next four
(above 5 tons) (5) years
CKD (Localized parts) 35% 25% 25% 20% 20% 20%
(20) (20) (20) (15) (10)
CBU 30% 25% Same rate shall continue for next four
(10) years
 32 5 Years Tariff Plan under AIDP-II
INPUT MATERIALS FOR PRIME MOVERS & RIGID TRUCKS
Present
Description 2012-13 2013-14 2014-15 2015-16 2016-17
2011-12

PRIME MOVERS

Raw Material 0% 0% Same rate shall continue for next four years

Sub Component 0% 0% Same rate shall continue for next four years

Component 0% 0% Same rate shall continue for next four years

Sub-Assembly 0% 0% Same rate shall continue for next four years

RIGID TRUCKS

Raw Material 0% 0% Same rate shall continue for next four years

Sub Component 5% 5% Same rate shall continue for next four years

Component 10% 5% Same rate shall continue for next four years

Sub-Assembly 15% 10% Same rate shall continue for next four years
 33 5 Years Tariff Plan under AIDP-II

BUSES
Present
DESCRIPTION 2012-13 2013-14 2014-15 2015-16 2016-17
2011-12
Buses (Non CKD (Non Localized) 5% 0% Same rate shall continue for next four
CNG / LPG) (0) years
CKD (Localized Parts) 35% 15% Same rate shall continue for next four
(15) years
CBU 20% 20% Same rate shall continue for next four
years
Buses CKD (Non Localized) 0% 0% Same rate shall continue for next four
(CNG /LPG (0) years
dedicated) CKD (Localized Parts) 35% 15% Same rate shall continue for next four
(15) years
CBU 0% 0% Same rate shall continue for next four
(0) years
 34 5 Years Tariff Plan under AIDP-II
INPUT MATERIALS FOR BUSES
(Non CNG/LPG)
Same rate shall continue for next four years
Raw Material 0% 0%

Same rate shall continue for next four years

Sub Component 5% 5%

Same rate shall continue for next four years

Component 10% 5%

Same rate shall continue for next four years

Sub-Assembly 15% 10%

(CNG/LPG)
Same rate shall continue for next four years
Raw Material 0% 0%

Same rate shall continue for next four years

Sub Component 0% 0%

Same rate shall continue for next four years

Component 0% 0%

Same rate shall continue for next four years

Sub-Assembly 0% 0%
 35

Auto Industry Investment Policy

(AIIP)
 Existing AIIP
36

Definition
New Entrant means a potential Assembler or
manufacturer of global significance who had no
assembly / manufacturing of similar vehicles in
Pakistan in the past and intends to assemble /
manufacture a vehicle by himself or through an
agreement with a Pakistani company.
 Existing Auto Industry Investment Policy
37

Incentives available
• New Entrants allowed to import 100% CKD kit, at the leviable
rate of customs duty (presently 32.5%), for a period of three
years from the start of assembly/manufacturing.

Eligibility criterion
• The potential new entrant will have annual production in
countries other than Pakistan as under:
• Cars = 100,000 units
• Tractors = 50,000 units
• Trucks and Buses = 25,000 units
• LCV’s = 40,000 units
 WHY THE NEED FOR NEW ENTRANT POLICY ?
38

Create a conducive environment to attract new investment and

expand existing opportunities as;
 No new investment since AIDP implemented in 2007

 Only few players are dominating the market

 Motorcycle segment not covered

 No provision for technology up-gradation

 No provision for revival of closed down units

 New Models/variants, if introduced by the existing players, are not

entitled to concessions envisaged under AIDP
Proposed auto industry investment
policy
 What to do?
40

 Need to change definition of new entrant and do away with

Quantitative restrictions

 Adjustment in the duty structure on import of CKD components

 Adjustment in CBU rate of duty to encourage local

manufacturing

 To review present import policy

 Incentivize New and advance technologies;

 What to be achieved ?
41

 To protect consumers interest and provides low price car to the

consumers

 Attract more investment to create competitive environment

 To achieve higher volumes where local manufacturing of vital

components become feasible .

 To enhance the vendor base of the country

 Job creation

 Technology acquisition

 To increase revenue to the ex-chequer

 Proposed New Entrant Policy- 2013-17

Eligibility criterion
 There will be no capping on the annual production in countries
other than Pakistan .

Other conditions
 The proposed new policy shall be applicable to all types of
vehicles, without any exclusions.

 No other condition will be applicable

42
 What is meant by new technology ?
43

Motorcycle
 New Technology would mean introduction in Pakistan for the first time an
improved design as a combination of engines, transmission, suspension
and environmental controls not previously manufactured/assembled in
Pakistan with a clear roadmap of 5 years for transfer of this new
technology.

Cars
 Hybrids, fuel cells or alternate energy source (excluding CNG/LPG) for
cars. (Emission or alternate fuel delivery systems or in isolation would not
be covered under this definition.)
Salient Features of New Investment policy
44

 The existing AIDP (2007-12) covers only four-wheeler segment,

while no incentives for new investment in “2-3 wheeler segment”,

 Proposed Investment Policy caters for all segments of auto-sector,

including 2-3 wheelers.

 Existing AIDP (2007-12) placed “Quantitative restriction” on new

investors in auto sector with regard to production volumes on
global basis,

 No such quantitative restrictions are suggested under the new

Investment Policy. Accordingly, any new player can invest in auto
sector, whether or not having any global presence.
 Proposed New Investment Policy
45

 A new investor in “four wheeler segment” shall be entitled to import 100%

CKD (whether or not locally manufactured) at CKD rate of duty, for a
period of three years from the start of assembly / manufacturing
operations, subject to the following conditions, viz.
 The new investor shall catch-up with the existing level of indigenization
within three years;
 The new investor shall submit a Progressive Plan For Localization, i.e.
the year-wise indigenization plan in respect of already localized parts
with reference to SRO 693(I)/2006;
 The parts agreed to be localized during 1st, 2nd and 3rd year, shall not
be entitled to be imported at prevailing CKD rate at the end of 1st, 2nd
and 3rd year, respectively; and
 Every new investment plan, as well as the plan for indigenization of
already localized parts shall be regulated through Auto Industry
Development Committee, to be notified by the Ministry of Industries.
 Proposed New Investment Policy
46

 A new investor in 2-3 wheeler segment (Motorcycle & Auto-

rickshaw), shall, subject to the aforesaid conditions, be entitled
to import non-localized CKD @ 10% customs duty, while the
parts / components / CKD related to new technology i.e. EFI
engine, automatic transmission, better environmental controls,
etc. @ 5% customs duty; whereas localized parts shall be
importable at additional duty prescribed for such parts under
SRO 693(I)/2006.
 The aforesaid Incentives shall also be available to those new
investors, who had previous assembly operations in Pakistan
and closed down due to any reason, but now intend to come
up either as 100% foreign equity, or as Joint Venture with new
partner(s).
 Proposed New Investment Policy
47

 A new investor shall also include an existing player

who will bring-in a new product / variant with a
new platform (but excluding model change of
existing variants / products).

 Hybrids, fuel cells or alternate energy source

(excluding CNG/LPG) cars shall also qualify to the
aforesaid concessions.
48

Thank you
49

Hyperlinked Slides
 50
Import of cars other than Used cars under the Trade

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Cars up to 1000cc 19,272 14,108 7,596 3,129 4,565 5,248 24,778

From 1001 to 1300 4,131 2631 1301 502 314 1,282 8,040

From 1301 to 1500cc 5,976 2,882 2,779 508 783 2,477 18,392

From 1501 to 1600cc 991 919 45 18 11 11 33

From 1601 to 1800cc 947 546 561 136 503 1,324 4,590

From 1801 to 3000cc 2,267 2,517 1,462 238 61 89 176

Above 3000cc 445 267 163 161 36 46 112

Jeeps (4x4) 9,251 3,097 2,214 870 309 284 852

Total 43,280 26,967 16,121 5,556 6,582 10,761 56,973

Source :FBR

50
51 Switching to newer technologies

 Fuel/ Emissions Standards

 Shift from CNG
 Fuel Efficiency
 Hybrid Technology
 Fuel Cell

BACK
52 Market Expansion
 Increase capacity utilization and encourage new
investment:
 Introduce new models/variants for consumers to
have more options
 to ensure availability of cars in the open market
and eliminate premium / On money
 Introduce schemes for the following segments of the
economy:
 Junior Government Employees
 Junior Executives of private sector
 Segment of people switching over from motorcycle to
small car
 Taxi Scheme
 Old car replacement scheme BACK
 53 Price rationalization
 All car/automobile manufacturers are in the private sector. As such
prices are governed by market mechanism only and Governments has
no control on any price fixation.
 Government’s role is to provide Policy frame work including tariff and
non tariff policy measures.
 Steps taken by Government to rationalize prices
 Age limit of imported vehicles increased from three years to five
under three different scheme of the trade policy
 Capping of Depreciation allowance increased from 50 to 60%

 Reduced the rate of sales tax from 17% to 16% and

 Abolished 1% Special Excise Duty

 However, all these steps failed to address rising trend in prices

NEXT
 54 Options available-Price rationalization
 Globally the prices are sensitive to Economy of scales and governed
by Demand & Supply.
 To achieve economy of scales new products / variants by the
existing players require to be incentivized.
 New players may be encouraged to break the present monopolistic
situation.
 With the availability of variety of products / variants the consumers
can buy a vehicle of his choice at competitive price .
 Reduction in duties on CBU’s to the level of developed countries is not
considered desirable as this would have adverse effect on the local
industry
 Rationalization of CKD rate of duty would have positive impact .
BACK
 55 Improvement in Quality Standards
Issues
 Presently Quality and safety standards are not available,

 Auto products have to meet certain regulations and standards.

 Separate national regulations and standards requires comprehensive

infrastructure
 Need to develop national standards in phase I and in Phase II to
harmonize our standards with global regulations / technical
requirements worldwide ,
 Vehicle or its parts manufactured according to that global regulation;

can be internationally traded without further tests or approvals,

NEXT
 56 Improvement in Quality Standards
Options
 To begin with, standards are needed to be prioritized in following five areas
while other standards will be taken up, subsequently:
 Brakes
 Emission
 Impact testing
 Suspension
 Lights
 PAMA to provide details of OEMs standards which are being followed by them
and their Principals so that the min. performance and safety standards be
adopted
 Integrate our standards with Harmonization of Vehicle Regulations (WP.29)
under the United Nations Economic Commission for Europe (UNECE).

BACK
 57 Financing Options
 Industrial development is dependent on consumption of its products
first in domestic and then in international market
 Historically the growth of the auto sector, domestic appliances and
other consumers products was dependent on consumer financing by
the Banks and the dealers.
 In this regards following needs to be considered :
 Encourage lease financing

 Special mark-up rates for small cars for the lower middle class

BACK
 58 Vehicle Replacement Scheme
 In Pakistan, a large number of cars that are 40 – 50 years old .
 Old cars have large adverse impacts on society in terms of safety
and the environment
 With per capita income improving, robust growth is projected on the
back of rising demand
 Need to create a low interest rate loan program to encourage owners
of old cars, which do not comply with environmental standards or
have been used for an extensive period of 40 to 50 years to
purchase new vehicles for the purpose of replacing such vehicles, with
the maximum amount of loan being Rs.1.5 million per vehicle.
 The interest rate proposed to be KIBOR + 2%, with the repayment
period of maximum seven years
 Increased sale of new cars to create economy of scales , leading to
the automobile industry becoming competitive.
BACK
 Consumer Rights Sensitization
59

 Dealership Malpractices
 Safety Issues
 Consumer Feedback

NEXT
 60 Consumer Rights Sensitization

Dealership Malpractices
 Customer has to pay the full amount of cost at the time of booking
which includes the duties and taxes.

 The cars are delivered to customers after several months, and in case
of price escalation, the customers are required to pay the price as on
date of delivery.

 Dealerships indulge in the negative practice of booking their own

vehicles in the name of fake customers (using their CNIC copies) and
they sell these cars to customers who want urgent purchase at
escalated prices (OWN/ Premium).
NEXT
61 Consumer Rights Sensitization
Safety Issues
 OEM’s still producing old technology cars which are phased out elsewhere
 Suzuki Mehran which has not seen any significant changes and is being
manufactured in the same shape since 1989 (23 years).
 Apparently, OEM not concerned towards the customers needs.
 Globally Corolla car is available in 1600 and 1800cc capacity, while in
Pakistan it is available in 1300 cc Shell .
 Corolla Xli is being manufactured continuously with defective braking system
 Pakistani customer is deprived with the latest technologies like Air Bag, ABS
breaking system etc.

NEXT
62 Consumer Rights Sensitization
Consumer Feedback
 In Pakistan there is no institutional mechanism to address consumer
feed back
 OEM’s do not take note of the any complain made by consumer
 Limited options for consumers creating import push
 Absence of competition in the Auto sector (segment-wise) leading
to price escalation
 Quality of vehicles is a prime concern

BACK
63 Road Map of AIDP-II: Cars
64 Light Commercial Vehicles
 65 Road Map for future
Technology Issues
 Fuel inefficient technologies leading to reliance on CNG
(engines not designed for CNG)
 OEM’s still producing old technology cars which are phased out
elsewhere
 66 Conclusions
 Sizable home market dominated by a growing middle class
 Pakistan – a strategic location having potential to become regional hub
 The industry exhibiting signs of recovery and is poised to touch 160,000
cars production in FY 2012-13
 Demand for passenger cars & LCVs is projected to reach 300,000 by
2017.
 Large latent demand for better quality small car (1000cc and below)
 A strong vendor base producing variety of parts and ready to expand
and integrate with global sourcing chain
 Competitive workforce in the region
 PAAPAM (Vendors) Viewpoint

• Any tariff concessions should be linked with indigenization plan i.e.

20% (by value) for the first year, 35% for the second year and 50%
for the third year, excluding 10% Assembly Charges.

• The new entrant shall give localization plan with reference to specific
parts, and import thereof by the new entrants shall be subjected to
higher tariff.

• The proposed tariff concessions should not be available to the new

models that may be introduced by the existing OEMs.
 68 Road Map of AIDP-II (option 1)
Rate of Custom Duty
Present 2012- 2013 2014- 2015- 2016-
CBU Cars 2011-12 13 -14 15 16 17
Up to 1000 cc 50 to 55% 50% → 45% → 40%
1001 to 1500cc 60 to 75% 60% → 55% → 50%
1501cc to 3000cc 100% + 50% RD 75% → 70% → 70%
Above 3000cc 100% + 50% RD 95%
2 CKD in Kit (%) 32.5% 27.5% → 25% → 20%
3 Components localized 50% 40% → 35% → 30%
4 Raw Material 0% 0% 0% 0% 0% 0%
5 Sub Component (%) 5% 5% 5% 5% 5% 5%
6 Components 10% 10% 10% 10% 10% 10%
Sub-assemblies shall be allowed to be
7 Sub-Assembly (%) 20%
imported at CKD rate of duty

Above proposals are subject to review on used car policy

 PAMA (Assemblers) Viewpoint

 No objection to new investment coming in provided existing OEMs are

provided level playing field. Suggest continuation of policies as per AIDP
to bolster confidence of investors.
 The local car industry operating at 30% capacity. Any tariff concessions
considered to adversely affect the local industry.
 Any special tariff for new entrants will create discrimination, besides
negative impact on revenues. Non-tariff concessions for new entrants are
supported.
 At best, new entrants may be allowed import of 100% CKD (whether
locally manufactured or not) at existing rate of customs duty (32.5%).
 In case special tariff is considered for new entrants, the same should also
be also be allowed for new models by existing OEMs.
70 Performance of Automotive Sector
Motor Cycle Industry estimated
1,600 1,570
1,600
1,380

1,400

1,200
1,058

1,000
976
840

752
800

570
600

371
400

175
200

109 121

0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
71 Performance of Automotive Sector
LCVs Industry

estimated
 72 Performance of Automotive Sector
Tractor Industry
80

73 72
70

60
60
Figures in 000 Nos

52 54
49 49
50

43

40
36
32
30
26
24

20

10

0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
 73 Performance of Automotive Sector
TRUCK/PRIME MOVERS
6,000

5,271

5,000
4,593

4,000
Figures in 000 Nos

3,727

3,304
2,957
3,000 estimated
2,877

2,000

1,000

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
 74 Performance of Automotive Sector
BUSES
1,400

1,200 1,160

1,073

1,000
Figures in 000 Nos

800 707
716
estimated
577 698
600

400

200

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Automotive Sector of Pakistan:
Production Performance 2001-02 – 2011-12
Production
Product 2001-02 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Cars 42,679 170,487 176,213 164,870 84,814 121,790 133,972 154,255

Jeeps/LCV 564 2,472 3,298 1,590 932 1,172 883 451

Pick-Up and 5,900 19,152 19,672 21,354 16,160 15,768 19,142 20,928
LCV

Trucks/Prime 1,134 4,533 4,593 5,271 3,304 3,727 2,957 2,877

Movers

Buses 1,086 825 1,073 1,160 707 716 577 698

Tractor 23,801 49,439 54,529 54,397 59,684 72,989 72,261 48,895

Motorcycle 137,273 751,379 839,850 1,058,109 976,842 1,380,184 1,600,781 1,570,205

Total 212,437 998,287 1,099,228 1,306,751 1,142,443 1,596,346 1,830,573 1,798,309

www.engineeringpakistan.com
 76 Performance of Automotive Sector
Car Industry 175
180 170 165
estimated
160 000 Numbers 154

140 134 134

122

120
104

100
84

80
66

60

40

20

0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
77 Growth Trend – Car Segment
175 Figures in “000”
180 170 165

160 154

140 134 134

122

120
104

100
84

80
66

60

40

20

0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
 78 Road Map of AIDP-II
Motorcycles Present
2011-12
2012-
13
2013-
14
2014-
15
2015-
16
2016-
17

CKD
Localized Parts for 70CC to 150CC 47.5% 40% → 35% → 30%
Localized Parts for 150CC above 47.5% 30% → → → →
Non-Localized Parts for 70CC to 15% 10% → → → →
150CC
Non Localized Parts for 150CC 15% 5% → → → →
above
CBU up to 70CC to 150CC 65% 50% → → → →
CBU up to 150CC Plus 65% 40% → → → →
 79 Performance of Automotive Sector
000 Numbers
200
1,800 1,600
170
180 175
165 1,600 1,376
160
150 1,400 1,600
140 122
134 1,200
134 1,058
120
1,000
104 908
100 840
800
84
752
80
600 570
66
60
400 371
40
200 175
109 121
20 0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011-
0 01 02 03 04 05 06 07 08 09 10 11 12
2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011-
03 04 05 06 07 08 09 10 11 12
25 80

73 72
20
21 19 70
20
60
60
Figures in 000 Nos

16 19 16 18 52 54
15 16 50
49 49

43

40
10 8 36
9 32
30
26
24
5 6
20
5
0 10

2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011-
01 02 03 04 05 06 07 08 09 10 11 12 0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
 80 Performance of Automotive Sector
000 Numbers
6,000

5,271
5,000
4,593
4,000
3,727
3,304
3,000 2,957
2,877
2,000

1,000

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1,400

1,200 1,160
1,073
1,000

800 707 716

600 577 698
400

200

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
 81 Company wise Market Share (%)
Manufacturers 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Pak Suzuki Motors 62 62 52 52 56 62

Honda Atlas 8 8 12 10 10 7

Toyota Indus 24 26 34 37 33 31

Dewan Farooq (Hyundai) 5 5 2 1 0 0

Nissan 0 0 0 0 0 0

Nexus Automotive 0 0 0 0 0 0

Raja Motors 0 0 0 0 0 0
82 CC wise Market Share (%)

Engine cc wise 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1300-1600 cc (2000cc Diesel) 32 31 48 50 46 43

1000 cc 30 29 20 19 19 19

800 cc 37 40 32 31 35 38