The document provides an overview of Pakistan's automobile industry. It discusses the history of the industry from its beginnings in 1953. It outlines the major players in the industry like Suzuki, Toyota, and Honda and their market shares. It also discusses the industry's contributions to GDP, employment, exports, and government regulations. However, in recent years the industry has experienced a major decline in sales of 44% due to rising costs and economic uncertainty in Pakistan. The government provides various incentives but also taxes the industry.

1. AUTO SECTOR OF PAKISTAN

2. HISTORY
 Pakistan Automobile Industry produced its first vehicle in
1953, at the National Motors Limited, established in
Karachi to assemble Bedford Trucks. Subsequently
buses, light trucks and cars were assembled in the same
plant.
 The industry was highly regulated until
early 1990’s
 After deregulation major Japanese manufacturers
entered in the market
 Assemblers of HINO Trucks, Suzuki Cars (1984), Mazda
Trucks, Toyota (1993) and Honda (1994) in particular,
entered once deregulation was introduced.

3. INTRODUCTION
 star performer of industrial sector during the last 6 to 7 years
 impressive annual compound growth, surpassing other sectors of the economy
 Become a part of global supply chain
 exporting 2/3 wheelers, cars and tractors in particular
 attaining a critical mass of production
 acquiring latest technologies
 improving human resource
 Pakistan Auto Industry has potential to become a global choice for outsourcing,
off shoring and becoming part of the global supply chain.
 There are presently 82 vehicle assemblers in the industry producing passenger
cars, light commercial vehicles, trucks, buses, tractors and 2/3 wheelers

4.  contribution to other sectors of the economy both tangible and intangible is highly
significant
 The auto industry economic and job multiplier in Pakistan context would be around Rs.1: 3
and 1: 8 respectively
 over 600 players in the vendor industry
 total investment of over Rs.98 billion
 contributes $3.6 billion to the economy
 largest ever drop in volume with sales of
 Locally assembled Passenger Cars (PC's) and Light Commercial Vehicles (LCV's)
declining by 44% to 27,159 units from 48,559 units
 due to the impact of political uncertainty and drastic slow down in the economic
environment of the country resulting in rising interest rates limited credit availability for auto
financing, depreciation of the Pak Rupee against all major currencies and unprecedented
rise in prices of oil, steel and other inputs causing high inflation and severe volatility in the
market place

5. Pakistan’s motorization level is 8 cars per 1,000 persons, one of the lowest
in the region.
Motorization levels:
 Country No. of cars per 1,000 persons
 Pakistan 8
 China 10
 India 12
 Indonesia 21
 Iran 23
 Sri Lanka 25
 Philippines 31
 Turkey 67
 UAE 193
 Saudi Arabia 236
 UK 426
 Japan 543
 New Zealand 580
 Australia 619
 Malaysia 641
 USA 785

6. MAJOR PLAYERS IN THE
INDUSTRY
Pak Suzuki Motor Company
 Pak Suzuki Motor Company Limited (PSMC) a subsidiary of Suzuki Motor Corporation
Japan has the distinction of being the first overseas Suzuki Plant to produce Suzuki
vehicles outside Japan
 By early 1990, on the completion of the first phase of this plant, in-house assembly of all
Suzuki engines started.
 In 1992 the plant was completed and production of the Margalla car commenced
 Presently the entire range of Suzuki products currently marketed in Pakistan is being
produced at this plant
 The Company continues to be in the forefront of the automobile industry of Pakistan

effective and comprehensive network of sales service and spare parts dealers

7. Indus Motor Company
 Indus Motor Company (IMC) is a joint venture between the House of Habib ,
Toyota Motor Corporation Japan (TMC) , and
Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing
and marketing of Toyota vehicles in Pakistan
 IMC's Product line includes 6 variants of the newly introduced Toyota Corolla,
Toyota Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore. We also have a
wide range of imported vehicles.
 The Indus Motor Company has started to assemble in Pakistan, the Toyota Hilux
model 4/2 van. The first hilux was rolled out at the end of October 2007.

8. Honda
 Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor
Company Limited Japan, and the Atlas Group of Companies, Pakistan
 All dealerships are constructed in accordance with the standards defined by
Honda World over. Percentage of local parts conforms to the government's
policy. Local vendors are continuously patronized to develop parts locally .
 Honda always strive to give outstanding service to our valued customers
Dewan Mushtaq Motor Company
 DMMC is committed to providing Sales, Service and Spare Parts under one roof
to the past, present and future customers of Mitsubishi Motors, and for this
reason DMMC has established 36 dealerships across Pakistan.
 DMMC makes Lancer, Pajero, L300 and L200
Dewan Farooq Motor Limited
Nissan Gandhara

9. Market Share

10. NUMBER OF CARS
2006/07-2007/08 COMPARISION
 Looking at car sales alone, it showed a poor performance during FY08
and fell by 11 percent to 147,441 units against 165,268 units last year.
The share of cars and LCVs in total auto sales came to 79 per cent and
21 per cent respectively.

11. CONTRIBUTION TOWARDS GDP AND
GOVERNMENT REGULATIONS
 Pakistan is amongst a few countries of the world which manufacture all
kinds of vehicles i.e. 2/3 wheelers, motorcars, LCVs, tractors, prime-
movers & trucks and buses.
 Contribution of Auto sector towards GDP was expected that to increase
to around 25% in the next 5 to 7 years.
 The GDP is expected to grow from $145 billion to $210 billion by the
year 2012. But this does not seem to be certain as the demand is falling
of cars so is the contribution of Auto sector towards GDP.
 After a boom of about five years the demand of cars has slowed down
by 55 percent
 The highest decline was seen in the sales of 1300cc and above cars,
which decreased to 1,382 units in July 2008 as compared to 4,701 in
July 2007, showing a decline of 71 percent, the lowest since November
2003

12.  Trucks sales lowered by 43 percent, buses 60 percent, LCVs/vans 26 percent,
tractors 45 percent, motorcycles and rickshaws 17 percent. While total sales of
auto sector was 29 percent less then the previous month, June 2008, 80,156
units down to 57,203 units in July 2008
 Current turmoil in the automobile industry has claimed jobs of around 150,000
workers
 Main reasons for this decline were policies, under which sales tax increased by
one percent, to 16 percent, five percent FED and fixing WHT at 2.5 percent in
current budget.
 Price of steel used by automotive sector increased by Rs 7,500 per ton in July
and Rs 8,500 per ton in August making around 12 percent increase in both
months.
 5 per cent excise duty has been levied; the revenues from automobile sector
would decline by over 25 per cent this year due to declining demand
 Auto industry paid Rs63 billion cumulative taxes that the government has levied
on automobiles.
 This year, despite additional duty the sector would hardly contribute Rs50 billion
in the national exchequer .

13.  The Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) and
Pakistan Automobile Manufacturers Association (PAMA) appealed to the government to
withdraw the 5 per cent excise duty on cars and impose a ban on import of used parts
instead of allowing their import after imposing 30 per cent redemption duty.
 To ease the financial burden the Federal Board of Revenue (FBR) suspended 2.5 percent
withholding tax till June 30, 2008.

 The tax is now again restored and is being charged at the time of registration of locally
manufactured cars.
 The auto industry demanded that not only tax exemption should further be extended but
also one percent federal excise duty on purchase of locally produced vehicles be removed.
 Government has recently approved a 5 year tariff plan for the auto sector to ensure a
stable and predictable environment and to facilitate investment.
 It has also been proposed that government technical institutes should be attached with
automobile companies for practical training

14.  development of infrastructure, human resource development, technology
acquisitions, investment in productive assets, cluster development and
development of standards on safety, quality and environment through a well
structured and deliberate approach
 The government has recently approved the Trucking Policy which provides
sustainable measures for the Modernization of Trucking Sector
 It has also proposed that the government may waive tax liability on cost of
training, which would be based on quality and number of persons trained by
these institutes.
 Companies producing over 500,000 units of cars/LCVs annually abroad will be
considered 'new entrants'. AIDP also includes new entrant policy, which
provides eligibility criteria, benefits and terms for new assemblers of cars/LCVs .
 The government discourages import of used cars through tariff measures and
calls for a uniform computerized registration system for access across the
country. It will enhance auto sector's contribution in GDP to reach 5.6 % and the
share in manufacturing sector to 25 % by 2011.

15.  The import duty on completely built units of cars would not be lowered to encourage
investment in auto sector, components and manufacturing.
 Government will also allow the assembly of new entrants through import of 100 % CKD
kit at the duty applicable to non-indigenized parts. However, they would have to provide a
commitment to develop and purchase local parts to fit in locally assembled cars.
 Cabinet's Economic Coordination Committee once again approved duty free import of
controversial 'black cabs' with new name of 'purpose-built taxis', and passenger buses.
 Central Board of Revenue had recommended to the ECC that import of these taxis without
duty and sales tax be allowed in CBU and CKD condition.
 According to the new price list issued by the assemblers in line with the Budget 2008-09,
cars prices swelled drastically ranging from Rs 30,000 to 0.4 million on various engine
capacities

16. CKD and CBU
 Performance of locally assembled vehicles or CKD remained sluggish during FY08.
 Market share of used CBUs had kept shrinking owing to the restrictions imposed on import
of higher age cars.
 During FY08, 18,000 CBUs (6,000 new and 12,000 used) were imported

17. DELETION PROGRAM
 Pakistan auto industry observed a “Preparation Phase – 1985-05” which was based
on the formulation and implementation of compulsory local content conditions,
commonly referred as deletion programs.
 Deletion programs worked on the basis of Industry Specific Deletion Programs
(ISDPs) and Product Specific Deletion Programs (PSDP). Under these programs
annual deletion targets for each model of vehicle would be set by giving choice to
assembler to choose components from a basket carrying fixed indices based on
their individual values.
 The EDB would conduct the technical audits annually to determine the achievement
or shortfall of deletion targets.
 In case of shortfall, assemblers would be penalized by charging the CBU rate of duty
on the value of components which were not indigenized in that period.
 Coupled with government’s macro economic reforms and rapid economic growth
from the year 2001 onwards, and through effective monitoring and implementation
of deletion programs, local content increased substantially.
 The localization nevertheless was less in those components which were high value
added or critical in design and operation. The “Preparation Phase – 1985-05”
observed couple of car assemblers and dozens of 2/3-wheelers coming into
operation.
 The economic objectives of that time i.e. import substitution, job creation and
investments in OE and vending sectors were achieved to a large extent.

18. Taxation on Auto Industry
The auto Industry remains second largest tax payer in terms of its
contribution to customs duty, sales tax and withholding tax.
 5% FED imposed on cars and jeeps with engine
size exceeding 850cc.
 Progressive WHT slabs imposed on locally
assembled cars.
 Import duty on CBU’s with engine size upto 1,800cc
increased by 10%, while import duty on bigger cars
and jeeps increased from 90% to 100%.
 Duties on car CKD’s reduced by 250bp to 32.5%.

19. BUDGET REPORT HIGHLIGHTS (2008-2009)
 Automobile Sector
 Pakistan’s automobile sector has been contributing 3.6 bn dollars
annually
 Pakistan’s automobile sector is also providing direct employment
opportunities to about 192,000 people.
 The production of cars/jeeps in the country during the period July-March
2008 decreased by 3.9 %
 LCVs continued to register a positive trend and showed a growth of 16.5
%.
 About 15,652 units were produced during July-March 02008 against
13,436 units last year.
 Production of buses grew substantially from 627 units to 828 units – a
healthy growth of 32.0 %.
 Production of trucks, as well, increased by 1.5 %.
 Motorcycles registered a phenomenal growth of 28.06 % and are
expected to grow further

20. Year-to-date demand supply analysis of local industry
 After a boom of about five years the demand of cars has slowed down by
55 percent.
 The highest decline was seen in the sales of 1300cc and above cars, which
decreased to 1,382 units in July 2008 as compared to 4,701 in July 2007,
showing a decline of 71 percent, the lowest since November 2003.
 A month wise analysis shows that not a single category of vehicles
showed positive results. For example, besides 1300cc cars, there was a
decline of 79 percent in 1,000cc cars, 33 percent in 800cc cars and in all
categories of cars decline was 66 percent.
 Trucks sales lowered by 43 percent, buses 60 percent, LCVs/vans 26
percent, tractors 45 percent, motorcycles and rickshaws 17 percent.
 While total sales of auto sector was 29 percent less then the previous
month, June 2008, 80,156 units down to 57,203 units in July 2008.

21. continued
 The domestic automobile industry recorded the largest ever drop in
volume with sales of locally assembled Passenger Cars (PC's) and Light
Commercial Vehicles (LCV's) declining by 44% to 27,159 units from 48,559
units for the quarter ended September 30, 2007.
 Looking at car sales alone, it showed a poor performance during FY08 and
fell by 11 percent to 147,441 units against 165,268 units last year.
 The share of cars and LCV’s in total auto sales came to 79 per cent and 21
per cent respectively.

22. IMPACT OF IMPORTED CARS
•During preparation phase, import tariffs on CBU’s of
cars and HCV’s remained very high and started phasing
down rather quickly in the later part.
•The import of used cars due to high import duties
remained minimum and were allowed only to the
overseas Pakistanis under the transfer of residence,
baggage and gift schemes. High import of used
•Cars in the last 2 to 3 years was however, to bridge
temporary demand – supply gap.
•Government’s intervention was owing to growing
demand supply gaps which resulted in delayed
deliveries and high premiums. A total of 64,764 used
and 14,363 new cars were imported during the last 3
years. During the same period 10,054 used trucks were
imported.

23. •The import relaxation led to stiff competition for the local auto industry as
imported cars provided value for money and customers were lured towards
buying them instead of locally assembled cars.
•This led to decline in demand for local cars especially some makes like
Hyundai Santro that was badly hit and customers preferred opting for the
imported Toyota Vitz etc.

24. HCV’S AND LCV’S

25. RECENT CRISIS OF US AUTO INDUSTRY
•The credit crisis that is affecting USA is wounding the U.S. auto
industry in many different ways.
•Carmakers can’t get loans to restructure and to produce new advanced
technology vehicles.
•Suppliers and dealers can’t get loans for routine business, and
customers can’t get loans for new cars
•All automakers have been affected by the dramatic drop in car sales
and by the credit crunch.
•Total U.S. auto sales in October were 838,000 vehicles, down 32 percent
from a year earlier. That represents an annualized sales rate of 10.5
million vehicles, the worst since 1983. Toyota’s U.S. sales in October
were down 23 percent, and Honda’s were down 25 percent.

26. IMPORTANT HIGHLIGHTS
 A GM shutdown would wipe out jobs among suppliers as well as at the
automaker itself, pushing the U.S. unemployment rate next year to 9.5
percent, compared with current projections of as high as 8.5 percent.
 A GM collapse would mean ``more aid to specific states like Michigan,
Ohio, and Indiana, and more money into unemployment and extended
benefits.
 A projection of $100 billion to $200 billion in costs dwarfs the $25 billion
industry bailout plan that will be debated in Congress next week to prop
up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on
taxpayers from a rescue or a GM failure is a central issue for U.S.
lawmakers.
 Congress has allocated $25 billion, but the Department of Energy is still
writing the regulations that will allow automakers to get access to the
loans, perhaps sometime next year. Further, since the Energy Bill was
passed, the credit crunch and sharply lower auto sales have made GM’s
situation even direr, and those loans, while appreciated, will be too little,
too late.
 GM Collapse at $200 Billion May Exceed Bailout Tab

27. Impact of Yen on Auto Sector
 This year the Yen has appreciated by almost 50%
 This had a negative impact on our automobile sector.
 The prices of imported cars have increased due to the
appreciating value of YEN against Pak Rupee ( MARK X)
 the buyers have to pay more in order to buy the same car
 Demand for imported cars from Japan has decreased due to
increase in their prices
 People have to pay 50% more for each car (PORT STOCK)
 Imported cars which are already in the market, their prices
have increased.

28. Impact of Yen on Auto Sector
 The cars which are assembled in Pakistan their input prices
have also increased as the companies have to pay more for
the raw material, paints and parts etc (IMPORT)
 Honda, Toyota and Suzuki are also increasing due to
increase in the input prices and the cost of producing has
increased
 Therefore the demand for used cars has increased as people
don’t have cash to buy new cars and consumer financing has
also become very expensive
 Increase in the prices of used cars
 The prices of cars have increased and the demand for used
car comparatively to new cars have increased.

29. IMPACT OF INFLATION AND CAR FINANCING
 Inflation has led to the increase in production costs and hence the list
price of various models of cars have sky rocketed in the recent months.
 Cost of Production coupled with more expensive parts due to yen
appreciation and higher duties plus taxes have all led to a plunge in
demand for new cars as prices have risen sharply.
 As interest rates were increased to curb inflation (Discount Rate@15 %)
so now the consumers are not willing to get cars financed by banks at
such higher rates which has reduced the demand for bank financed
cars.
 Car financing by banks has been cut down greatly due to many
customers defaulting.

30. FUTURE OUTLOOK
 In view of frequent price-hike in gas and petroleum products,
the four wheelers’ sales growth is likely to decline
significantly during the FY09
 The increase in prices due to the imposition of Withholding
Tax, Federal Excise Duty and GST along with halt in auto
financing facilities and rising interest rates on auto loans,
charged by the commercial banks, the local cars and LCVs
unit sales is expected to report negative growth of around 9
per cent in FY09.
 The local auto assemblers profit is also projected to remain
under pressure owing to expected exchange rate
depreciation and rising costs
 components used in assembling vehicles being imported,
declining rupee has significantly increased costs of local auto
assemblers.

31. FUTURE OUTLOOK
 The car dealer told The Nation on Thursday that the soaring PoL
product prices badly affected their cars and Light Commercial
Vehicles (LCVs) sales business and consumers were reluctant to
buy any variant of new or used locally produced/imported car. The
impact of increase in WHT, FED and GST directly passed on to the
buyers
 According to the new price list issued by the assemblers in line with
the Budget 2008-09, cars prices swelled drastically ranging from Rs
30,000 to 0.4 million on various engine capacities in terms of
different taxes levied on car sales
 Dealers said, adding that even if the current sky-rocketing trend in
oil and gas prices get continued, consumers will be scared about
the maintenance of their vehicles rather than to buy a new car.
 Industry analysts are of the view that the fall in auto sales is
expected due to inflationary pressures in the economy refraining
people from purchasing luxury items

32. FUTURE OUTLOOK
 Government has imposed 5% FED and fixed rates of WHT on auto sales in
Budget FY09, to discourage consumer spending on luxury items
 Rising interest rates have made auto financing expensive, which accounts
for almost 60-70% of the total auto sales
 Already in FY08, auto sales have depicted negative growth of 11% to 187k
units compared to 204k units in FY07 ( Situation will be worse in 2009)
 Economist expects further rupee depreciation, on average exchange rate,
of 13% in FY09 against the US$. This would substantially increase costs for
CKD (Completely Knocked Down) kits for the local companies, negatively
impacting their gross margins
 Steel prices have been continuously rising in the international market
 This sharp rise in steel prices has caused the cost of both imported and
local components to rise, increasing purchase costs for local auto
assembling companies

33. FUTURE OUTLOOK
 In Short this is just the trailer… there's more
to come… Wo kia boltay hai???
 “Picture Abhi bakee hai meray
DOST!!”
Samjhay k NAi???????

34. VISION 2012
 To make auto industry a global player, achieving
competitiveness through a critical mass of production,
contributing to the GDP by 5.6% by 2012, attracting large
investments, development of technologies and human
resource through a well structured policy framework
formulated in consultation with stakeholders.
 Pakistan auto industry because of the country location and a
diversified range of products and particularly in the 2-
wheelers, low engine capacity and fuel efficient cars & LCVs
and tractors along with auto components has the export
potential.
 The industry has been barely meeting the local demand while
the increasing growth has convinced the principals to expand

35. VISION 2012
 The 2-wheelers have entered into export market followed by tractors though
indirectly, and few models of Suzuki Motor Car and components are in the process of
confirming the export orders.
 In the next phase, Pakistan auto industry is expected to position itself in the auto
services and an attractive out-sourcing hub for the manufacturing of forgings,
castings, wire- harnessing and machining of components
 The AIDP has laid a target of export of US$ 650 million by the close of the year
2011-12.
 Pakistan imported auto products including CKD kits of a value of $ 1.3 Billion during
2005-06
 Earlier while working on Vision 2012 for the engineering sector, stakeholders
had vowed to make the Auto Industry foreign exchange neutral by the year 2012.
 Government will continue facilitating the industry to develop market and product know
how, industry participation in major trade fairs, enabling fiscal policy, capacity
building and due recognition to the exporters.

36. CHALLENGES FACED BY AUTO INDUSTRY
 Auto industry is generally faced by multiplicity of taxes; the
presumptive tax regime has led to increase in prices of
imported inputs and the finished goods (under-invoicing,
misdeclaration and smuggling )
 Imposition of Federal Excise Duty on the royalty and
technical fee remitted to the Suppliers of technology remain a
potential barrier to innovation
 High cost of capital and relatively difficult access for the
small and medium enterprises and lack of any incentive in
the financial policy for the auto industry. Need of a dedicated
fund for technology and Human Resource Development.

37. CHALLENGES FACED BY AUTO INDUSTRY
 Increasing cost of energy and its unreliable and inconsistent supply adds
up the cost of manufacturing and wastage of resources. It is estimated
that by the year 2012, auto industry consumption of electricity will cross
500 – 600 MW from around 250 - 300 MW, as of now.
 To improve competitiveness, government and industry’s high focus is
needed on investment in HRD, technology and productive assets and
supply chain management.
 Benchmarking the performance of industry against the world practices,
adopting best manufacturing practices and production techniques and
producing globally acceptable quality products.
 An all embracing and consultative policy making with elements of stability
and predictability through effective participation of industry in the policy
formulation, implementation and review process

38. Future Prospects
Problems with Today's Automobiles:
 What Makes them Run?
 Fuel: Our automobiles are powered by fuel,
mostly petroleum based petrol There are two
major associated problems:
 a) The exhaust of the fuels is major pollutants
and contributors to the greenhouse effect
 b) Estimates show that the reserves of fossil
fuels are only finite and can last for another 100
years, if used at the same rate
 Alternate Fuel :Hydrogen H2 ( Engine extracts
H2 from water and release O1 in the air)

39. Future Prospects
 Road Powered Electric Vehicles:
Another fascinating idea is that the automobile is
driven by the power from not within, but
without. The car travels on a road that is
embedded with electric cables. These cables
activate an electronic circuit inside the car
which drives the motor and the axle of the
wheels, through electromagnetic interaction.
This technology requires close vicinity of the
automobile and the surface of the road.
Moreover, the cost for laying down such a road
amounts to more than a million dollars per mile,
so the idea seems more as a phantasm than a
reality-to-be-turned-true.
 Fuel Cell Electric Vehicle:
A fuel or a flow cell is a special type of chemical
cell. The reactants of such a cell are constantly
supplied from the exterior of the cell

40. Hybrid Cars and their Twofold Approach
 During start-up and at
ordinary speeds, the
battery supplies
electrical power to the
motor that drives the
wheels. While running
downhill or during
deceleration, the
excess mechanical
output from the motor,
is supplied to a
generator.