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Losses of Automobile Industry In Pakistan

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This report is regarding the impact on local auto-mobile industry due to the import of used cars.

Veröffentlicht in: Automobil, Business

Losses of Automobile Industry In Pakistan

  1. 1. AUTOMOBILE INDUSTRY ABSTRACT This report is regarding the impact on local automobile industry due to the import of used cars. Dr. Tahir Ali Business Research Report
  2. 2. 1 | P a g e B u s i n e s s R e s e a r c h R e p o r t Table of Contents 1. Narrow Down Chart..........................................................................03 2. History of Automobile Industry........................................................04 3. Current Market Share Holder...........................................................05 Pak Suzuki...................................................................................05 Atlas Honda……………………………………………………………………..05 Indus Motors Toyota…………………………………………………………06 4. Current Performance of Automobile Industry.................................07 Cars Production & Sales Level……………………………………………09 Market Share of Local Cars……………………………………………….09 5. Overview of Imported Cars…………………………………………………….10 Comparison between Imported & Used Cars………………………10 6. Problem Statement…………………………………………………………………13 Hypothesis……………………………………………………………………….14 Population………………………………………………………………………..15 Sample Table……………………………………………………………………21 Questionnaires………………………………………………………………….22 Summary …………………………………………………………………………28 Conclusion……………………………………………………………………….32 7. References……………………………………………………………………………..33
  3. 3. 2 | P a g e B u s i n e s s R e s e a r c h R e p o r t ACKNOWLEDGEMENT In the name of “Allah”, the most Beneficent and Merciful who gave usthe strength and knowledge to complete this report. This report is a part of our course. This has proved to be a great experience. This report is a combined effort of Asad Ahmed, Neelam Abdul Khaliq, Nasar Wahab, Zainab Raza and Irtaza Zaidi. We would like to express our gratitude to our subject teacher Dr. Tahir Ali; who gave us the opportunity to prepare this report. We would also like to especially thank the representatives of Automobiles Dealers: Mr. M. Raheel (Honda Drive in), Mr. M. Shahid (J.P Trading Co.), Mr. Naseem Iqbal (Suzuki Macca Motors), Mr. Naveed Akhtar (Toyota Eastern), Miss Quratulain Rashid (Suzuki Macca Motors) They all participated in a focus group session to make our work better. They gave us many helpful comments which helped us a lot in preparing our report.
  4. 4. 3 | P a g e B u s i n e s s R e s e a r c h R e p o r t Chart – Narrow Down Of The General Problem Area Automobile Industry Passenger Cars Trucks Other Vehicles Locally Manufactured Cars Imported Cars Losses To Local Manufacturers
  5. 5. 4 | P a g e B u s i n e s s R e s e a r c h R e p o r t HISTORY OF AUTOMOBILE INDUSTRY IN PAKISTAN The Pakistan automobile industry is a crucial part of our growing economy. It has gone through different phases 1950’s (Private sector).1960’s (Private sector). 1970’s (Nationalization).1980’s and onwards (Privatization & entry of private sector). The industry started in Pakistan when the first automobile plant was set up in May 1949 by General Motor & Sales Co., it was set up on an experimental basis, and however, it grew into an assembly plant for Bedford Truck and Vauxhall cars. Seeing such progress, three major auto manufacturers from the U.S collaborated with Pakistani business men to set up; Ali Automobiles to manufacturer Ford Products in 1955, Haroon Industries to assemble Chrysler Dodge cars in 1956, Khandawalla industries to assemble American Motor Products in 1962, and Mark Trucks Plant in 1963. However, the absence of technological knowledge, the basic professionalism, led to demise of these organizations. Our industry operates under franchise and technical cooperation agreement with Japan, Europe, Korea and China. The auto industry in Pakistan is fast evolving as a robust industry. Some sub-sectors of this fast growing industry, like motorcycle production, have already achieved economies of scale. The level of motorization has also been gradually rising over the years. In 1998-99, it was three cars per 1000 persons, which has significantly increased to 11 cars per 1000 persons in 2005-06. The indigenous production of motorcycles increased by 25 per cent during 2005-06, reaching to an all-time high of 520,124 as compared to 106,797 units in 1996-97, which accounts for around 380 per cent increase in motorcycle production during the last nine years. The production of trucks as well as that of buses has also posted 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, showing a rise of 51 per cent. In the case 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. Investment in the automobile industry in Pakistan started in the mid-50 when Kandawalla Industries established its units for assembling buses and trucks, the company's name was later changed to NayaDaur Motors. National Motors took the indigenization when it came out in the 60's and was said to have reached above 80% deletion of the Bedford lorries and trucks before it closed down. Towards the end of the seventies, all automobile assembly in Pakistan stopped, until 1983 when PAK SUZUKI started manufacturing their vehicles in Pakistan. Further Toyota Indus Motors was setup, followed by Honda. Today we have four major automobile manufacturing industries, these include, Toyota Indus Motors, Pakistan Suzuki, Honda Atlas and Diwan Farooq Ltd.
  6. 6. 5 | P a g e B u s i n e s s R e s e a r c h R e p o r t Current Market Share Holders Suzuki The firm was founded in 1983 as a joint venture between the government of Pakistan and Suzuki Motor Japan, formalizing the arrangement by which Awami Auto Ltd. had produced the Suzuki SS80 from 1982. Suzuki originally owned 25% of the stock, and have gradually increased their holding; they now own 73.09%. Pak Suzuki is the market leader in Pakistan Automobile Market by having more than 60 % (December, 2011) of Market Share. Having Market Share of more than 50% since its inception, Pak Suzuki always strive to introduce new and innovative Products and Services. Pak Suzuki has the largest Dealers network offering 3S (Sales, Service and Spare Parts) facilities across Pakistan. Its recently launched Suzuki Swift Brand has helped Pak Suzuki increase their Market Share in 1300cc segment. Apart from giving automobile related services like Suzuki Finance and Suzuki Insurance, Pak Suzuki also deals in Pak Suzuki Certified Used Cars. All cars by Suzuki Pakistan generally lack essential features which are standard in other cars, such as airbags, rear windshield defogger and rear seat belts. As of 2006, the Pakistani- assembled Suzuki Mehran is sold equipped with a CNG tank and is one of the few cars in the world which still uses a carburetor-based engines.However from the end of 2012 Suzuki Mehran got equipped with EFI engine. Toyota The Indus Motor Company Limited (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 inPakistan since July 1, 1990. Indus Motor Company are Manufacturers, assemblers, distributors and importers of Toyota and Daihatsu vehicles, spare parts and accessories in Pakistan. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25% stake in the company equity. The majority shareholder is the House of Habib. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres (0.42 km2 ). Indus Motor Company’s plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented.
  7. 7. 6 | P a g e B u s i n e s s R e s e a r c h R e p o r t IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore. They also have a wide range of imported vehicles. Honda The Atlas Honda Limited is a joint venture between the Atlas Group and Honda Motor Company, Japan. The Atlas Honda was created by the merger of Panjdarya Limited and Atlas Autos Limited. In 1988, both these motorcycle manufacturing concerns were established by the Atlas Group. Atlas Honda manufactures and markets Honda motorcycles in collaboration with Honda Motor Company. Atlas Honda also manufactures various hi-tech components in- house in collaboration with leading parts manufacturers like Showa Atsumitech, Nippon Denso and Toyo Denso. Atlas Honda Plants are located in Karachi,and Sheikhupura. Honda Atlas makes two Honda Models in their plant located in Pakistan. They are Honda Civic and City. Honda Atlas began their assembly of Honda City in the year of 1997. The car was at first available in the 1.3 liter but soon was available in both 1.3 and 1.5 liter engines. Along with these two models, the company sells Honda Accord to Pakistani customers but is imported from Japan. Honda Atlas assembles four motorcycles in Pakistan, the CD70, CD100, CG 125 and CG 125 Deluxe
  8. 8. 7 | P a g e B u s i n e s s R e s e a r c h R e p o r t CURRENT PERFORMANCE OF AUTOMOBILE INDUSTRY IN PAKISTAN Pakistan Automotive Manufacturers Association (PAMA) has just released the local automobile industry’s sales and production numbers for the month of August’12. As per the data, car sales have witnessed a substantial decline of 30% YoY to 20,687units in 2MFY13 as against the sales of 29,537units in the corresponding period last year. However, on monthly basis, industry sales remained with 10,335 units in the month of August’12 in comparison of 10,352 units in the previous month. Overall industry sales were lower because 1) higher based effect due to end of the Government of Punjab’s yellow cab scheme 2) massive increase in the prices of various variant due to Rupee devaluation and increased of being Euro II compliant 3) suspension of Alto which is 1000cc car have shifted interest of the buyers toward imported cars. Pak Suzuki Motor Company Limited (PSMC) has witnessed a 37% YoY decline to 11,617 units in 2MFY13 as against the sales of 18,301 units in same period last year. Suzuki Cultus under the domain of 1000cc segment witnessed a decline of 14% YoY to 2,308 units in the comparison of 2,672units in the same period last year, followed Suzuki Mehran whose sales were down by 12%YoY to 4,832 as against 5,515 units in 2MFY12. Biggest decline was seen in the sales of Suzuki Bolan which has experienced a decline of 41% YoY to 1,624 units in 2MFY13 as against the sales of 2,775 units in the 2MFY12. Sales of Bolan and Mehran were lower due to higher base effect as during the same period last year sales of these two were higher because of the deliveries to the Government of Punjab on account of Yellow Cab Scheme. In addition to that, suspension of the Alto production which was the hot cake segment under the 1000cc category has also impacted the sales negatively. However, Suzuki Swift maintained its higher sales as during 2MFY13 its sales were up by 45%YoY to 3,793 units as against the sales of 2,608 units in 2MFY12. Indus Motor Company Limited (INDU) witnessed has also witnessed 30% YoY a decline in sales to 6,179 units in 2MFY13 as against 8,829 units in the same period last year. Toyota Corolla posted decline in sales of 28% YoY to 5,264 units in 2MFY13 as against 7,362units were recorded in 2MFY12. However, sales of the Hilux, under pick-ups segment showed a rise in sales by 35%YoY to 846 units as against 627 units in the same period last year. Honda Atlas Cars Pakistan Limited (HCAR) stood the only cars assembler whose sales have increased in 2MFY13, as its sales showed a growth of 20%YoY to 2,891 units against the sales of 2,407 units in the 2MFY12. The higher sales were only because the increase in demand for the CITY whose sales were up by 48% to 2,184 units in 2MFY13 as against the sales of 1,475 units in 2MFY12, while, sales of the Civic were down by 24% YoY to 707 units as against the sales of 932 units in 2MFY12. However, on the monthly basis, the sales of the company were down by 25%. As far as the market Share is concerned, Pak Suzuki Motor Company leads the market with 56% Market share followed by Indus motor company and Honda Atlas Cars with 30% and 14% market share respectively in 2MFY13.
  9. 9. 8 | P a g e B u s i n e s s R e s e a r c h R e p o r t We see further pressure on the car sales going forward due to exorbitant increase in prices and persistent influx of imported cars as around 54,000 cars were imported in FY12 by the auto dealers under gift, personal baggage scheme which is termed as the misuse of privilege by the local industry players. The local industry has also demanded the GoP to restrict the import of used cars to 3 years as they complained these tempered meter and non-Euro Compliant. We believe if the measure are taken by the GoP we can see a bounce back in sales volume.
  10. 10. 9 | P a g e B u s i n e s s R e s e a r c h R e p o r t 56%30% 14% Market Share Suzuki Toyota Honda Market Share of Local Cars
  11. 11. 10 | P a g e B u s i n e s s R e s e a r c h R e p o r t OVERVIEW OF IMPORTED USED CARS The numbers match the reality on the roads. Imports are gaining ground. 26 out of every 100 cars sold in 2011-12 were imports, according to data compiled by PAMA. The share of imported cars has phenomenally increased as more than 55,000 cars reached the country, up 162% from 21,000 cars imported a year ago. However, at the same time, sales of locally assembled cars also surged by 23 percent to 157,325 units compared with the preceding year’s 127,944 units. In line with the local trend, Toyota, Suzuki and Honda constitute the largest share in the import market. Other than these three, Mitsubishi and Nissan also have a noticeable share. Car importers are trying to convince the government to increase the age of imported used cars to 10 years from the current 5 years. Car importers believe they can easily double car imports from the present 55,000 to around 100,000 if the government increases the age limit. 1000cc and below lead the way Of the five engine categories, around 45% of total imports belong to 1000cc and below category that includes Toyota Vitz, data shows. Toyota Vitz and Toyota Passo are the leading Toyota models while Daihatsu Mira is also popular in small cars, dealers said. The other four engine categories, 1000cc and above, together constitute the remaining 55% of car imports. Analysts believe that the share of 1000cc and below category will further increase with the changing dynamics of the local market. With the discontinuation of DiahatsuCuore and Suzuki Alto, imported cars of 1000cc or less are expected to fill the gap left in the local market. The reason behind the rising demand of imports is the shrinking difference between the price of locally assembled cars and their foreign counterparts. Customers prefer used Japanese cars because of variety, uniqueness and quality despite them being slightly more costly than local counterparts. Vitz 2006 and 2007– one of the popular imports in the 1000cc category – is available for Rs0.9 to 1 million while Suzuki Cultus, popular local hatchback in the same segment, is available for Rs965, 000. The relatively classier locally assembled Suzuki variant Swift – belonging to the 1000cc to 1300cc category –is priced between Rs1.2 million and Rs1.3 million, slightly higher or in the same range as imports from Japan. Cars and other automobile vehicles are being imported through three major schemes; personal baggage scheme, transfer of residence scheme and gift scheme. Of the total, 98% have been imported under the personal baggage scheme while 1,050 cars reached the port under transfer of residence and gift schemes.
  12. 12. 11 | P a g e B u s i n e s s R e s e a r c h R e p o r t Cars with up to 1000cc engines is the leading category more than 24,507 cars units, bringing its share to 44.5% of total car imports in fiscal year 2012. The second leading category was 1301cc to 1500cc cars which stood at 17,601 units and made 32% of total car imports. The third category was 1001cc to 1300cc segment in which 7,882 units were imported and constituted 14.3% of the market share. In the gas guzzler category of cars belonging in the 1601cc to 1800cc category, 3,986 units were imported. Comparison between Imported Cars & Local Cars 45% 14% 32% 9% Imported Used Cars Categories upto 1000cc 1001cc to 1300cc 1301cc to 1500cc 1501cc to 1800cc 21000 55000 127944 157325 2011 2012 Comparison Imported Cars Local Cars
  13. 13. 12 | P a g e B u s i n e s s R e s e a r c h R e p o r t Overall Market Share 74% 26% Market Share Local Cars Imported Used Cars
  14. 14. 13 | P a g e B u s i n e s s R e s e a r c h R e p o r t PROBLEM STATEMENT The purpose of this research report is to examine the effects of Imported used cars on the local automobiles manufacturers.
  15. 15. 14 | P a g e B u s i n e s s R e s e a r c h R e p o r t HYPOTHESIS: Directional Hypothesis: Instability in local currency increases the losses to the local automobile manufacturers. (Positive relationship) Heavy government taxes on the import of spare parts leads to the heavy losses to the automobile manufacturers. (Positive relationship) Rapid increase in the import of used cars, increase the losses to the automobile manufacturers. (Positive relationship) Non Directional Hypothesis: There is a significant difference in the instability of local currency and the losses to the local automobile manufacturers. There is a relationship between the government taxes and losses borne by the local automobile manufacturers. There is a significant difference between the import of used cars and losses borne by the local automobile manufacturers.
  16. 16. 15 | P a g e B u s i n e s s R e s e a r c h R e p o r t POPULATION Local Authorized Dealers (Karachi) Pak Suzuki: 1. I.G Motors Address: C-15, Block-20, F.B. Area, Karachi. Phone: (021) 36808871-3, 36805935-7, (021) 111-717-273 E-mail: igmotors@gmail.com Website: www.igmotors.com.pk 2. Suzuki Khair Agency Address: 12, Merry Mansion, Frere Road, Karachi Phone: +92-21-32724541 3. Riaz Motors Address: 273/1 Korangi Creek, Near CBM Karachi. Phone: (021) 35122190-3 E-mail: sales@riazmotors.com.pk 4. SNA Motors Address: Plot No. SB-9, Sector No. 27, Korangi Industrial Area, Karachi. Phone: (021) 35077161-65, 35067132 E-mail: snamotor@gmail.com
  17. 17. 16 | P a g e B u s i n e s s R e s e a r c h R e p o r t 5. Suzuki South Address: Plot No. 25/1, Sector No. 23, Korangi Industrial Area, Karachi. Phone: (021) 35077433, 35077436 E-mail: info@suzukisouth.com.pk Website: www.suzukisouth.com.pk 6. Polad& Co. Address: Polad Building, M.A. Jinnah Road, Opp. Gul Plaza, Karachi. Phone: (021) 32720532, 32720574 (021) 111-111-497 E-mail: suzukipolad@yahoo.com 7. Mandviwalla Motors(Pvt) Ltd Address: Mandviwalla Chambers, Old Queens Road, Off M.T. Khan Road, Karachi. Phone: (021) 111-111-135 E-mail: info@mandviwalla.com.pk 8. Suzuki Defence Motors Address: Plot No. 145, Phase-I, Defence Housing Authority, Main Korangi Road, Karachi. Phone: (021) 35892430-1 E-mail: sdm263@yahoo.com 9. Suzuki Macca Motors Address: FL, 08-09, Main Rashid Minhas Road, Karachi. Phone: (021) 34588991-5 E-mail: suzukimaccamotor@msn.com Website: www.maccamotor.com
  18. 18. 17 | P a g e B u s i n e s s R e s e a r c h R e p o r t 10. Nadeem International Address: Plot No. 164, JogiMor Main National Highway Karachi. Phone: (021) 35001524-31 E-mail: azm@cyber.net.pk 11. Margalla Motors Address: 166-A, Sir Syed Road Opp. Khalid Bin Waleed Road, Block-III, P.E.C.H.S., Karachi. Phone: (021) 34531374-5, (021) 111-007-786 E-mail: margallamotors@yahoo.com 12. Danish Motors Address: 167-F, Block III, Khalid Bin Waleed Road, P.E.C.H.S., Karachi. Phone: (021) 34557151-2, 34558458-9 E-mail: danishmotors@hotmail.com 13. Naseer Autos Address: D-55-A/1, Estate Avenue, S.I.T.E, Karachi. Phone: (021) 32573266-69, 32567160-1 E-mail: naeemrafay@yahoo.com 14. Suzuki Western Motors Address: F-44, Estate Avenue S.I.T.E, Karachi. Phone: (021) 32571786, 32582981-82 E-mail: suzukiwestern@yahoo.com
  19. 19. 18 | P a g e B u s i n e s s R e s e a r c h R e p o r t 15. Plaza Motors Address: 331 AM, Preedy Street, Opp. Preedy Police Station, Saddar, Karachi. Phone: (021) 32722925, 32720771 16. Suzuki Carachi Motors Address: 1, Banglore Town, Main Shahrah-e-Faisal, Karachi. Phone: (021) 34547145, 34545376, 34385042 E-mail: sales@carachimotors.com Website: www.carachimotors.com.pk 17. Suzuki Motorways Address: Near Cantonment Board Faisal, Main Shahrah-e-Faisal, Karachi. Phone: (021) 34573361-2, 34576624-5 E-mail: suzukimotorways1@hotmail.com 18. Khalil Motors Address: D-3, Al-Hilal Co-Operative H.S. Opp. Askari Park, Main University Road, Karachi. Phone: (021) 34923526, 34944113-4 E-mail: khalil.motors@yahoo.com
  20. 20. 19 | P a g e B u s i n e s s R e s e a r c h R e p o r t Honda Atlas: 1. Honda Shahrah-e-Faisal Address: 13-Banglore Town, Main Shahrah-e-Faisal Phone: (021) 4527070, 4527373, 4547113-6 Fax: (021) 4526758 2. Honda S.I.T.E. Address: C-I, S.I.T.E, Main Manghopir Road Phone: (021) 2577411-2, 2569381, 2570301 Fax: (021)2577412 3. Honda South Address: I-B/I, Sector-23, Korangi Industrial Area Phone: (021) 5050251-4 Fax: (021) 2577412 4. Honda Drive-In Address: 118-C, Main Rashid Minhas Road Phone: (021) 4992832-36 Fax: (021) 4992823 5. Honda Defence Address: 67/1, Korangi Road, Near HINO Circle Phone: (021) 5805291-94 Fax: (021) 5805293
  21. 21. 20 | P a g e B u s i n e s s R e s e a r c h R e p o r t 6. Honda Quaideen Address: 233-A-2, PECHS Phone: (021) 4556071-73 Fax: (021) 4554644 Toyota: 1. Toyota Central Motors Address: 3, Kathiawar Housing Society Main Sharah-e-Faisal Karachi Phone: (92-21): 4532246, 4536246-49 Fax: (92-21): 4546047 E-mail: toyota@cyber.net.pk 2. Toyota Eastern Motors Address: 118. Rashid Minhas Road Karachi Phone: (92-21): 4614077, 4614177 Fax: (92-21): 4610177 E-mail: toyotaeastern@yahoo.com 3. Toyota Southern Motors Address: Plot 13, Sector 23, Korangi Industrial Area, Karachi Phone: (92-21): 5053181-86, 5061551-53 Fax: (92-21): 5053187 E-mail: tsmkhi@hotmail.com
  22. 22. 21 | P a g e B u s i n e s s R e s e a r c h R e p o r t 4. Toyota Defence Motors Address: 118, Defence Housing Authority Main Korangi Road, Karachi Phone: (92-21): 5386022-7, 5888826, 5888849, 5888862 Fax: (92-21): 5887085 E-mail: toyotadefence@hotmail.com 5. Toyota Western Motors Address: C-38, Estate Avenue, S.I.T.E. Karachi. Phone: (92-21): 2564531-35 Fax: (92-21): 2564536 E-mail: toyowest@cubexs.net.pk 6. Toyota Society Motors Address: 150-F, BLOCK 2, P.E.C.H.S. Khalid Bin Waleed Road, Karachi. Phone: (92-21): 4383213-14, 4383217, 4523289-90 Fax: (92-21): 4523289 E-mail: toyota@cyber.net.pk 7. Toyota University Motors Address: 7 - 9, ChandniChowk, Main University Road, Karachi. Phone: (92-21): 4940417, 4941747, 4943145, 4947130 Fax: (92-21): 4949202 E-mail: toyota_university@hotmail.com
  23. 23. 22 | P a g e B u s i n e s s R e s e a r c h R e p o r t Dealers Of Imported Cars (Karachi) Undefined - Not registered / A list is not available. Customers Of Local Cars (Karachi) Undefined - Not registered / A list is not available. Customers Of Imported Cars (Karachi) Undefined - Not registered / A list is not available. Pakistan Association of Automotive Parts and Accessories Manufacturers - PAAPAM (Karachi) South Office (Karachi) Address: 204, 2nd Floor, Suleman Center, SC-5, ST-17, Sector 15, Korangi Industrial Area, Karachi. Phone: +92-21-35113841, +92-21-35412514 Fax: +92-21-35113842 Cell: +92-300-8230095 E-mail: chairman@paapam.com, paapam@gmail.com Karachi Office: karachioffice@paapam.com
  24. 24. 23 | P a g e B u s i n e s s R e s e a r c h R e p o r t QUESTIONNAIRE Q.1 Do imported cars make an impact on the local automobile industry? A. There is a significant impact of imported cars on local automobile industry in Pakistan. Q.2 Are imported used cars effecting the local employment? A. The CBU imports are affecting the employment of workers in auto industry besides that it is also inflicting damage to foreign reserves and national economy. Q.3 In what ways do local cars provide better customer satisfaction as compared to imported used cars? A. Local automobile industry has an edge due to its wide 3s (sales, services and spare) dealership network. Q.4 What is your opinion about the role of government in this situation? A. Government is supporting the import because it is generating profits for the local government and destroying local auto mobile industry by imposing additional per unit tax. Q.5 What are your comments with respect to the increment in the demand of imported cars is due to the lack of technological advancement in the local sector? A. Imported cars are more technologically advance and provide features such as air bags , power windows , better mileage , sound system , automatic transmission , suspension and AC performance by comparing two same priced cars. Q.6 What will be the effect of increase in price on local automobile industry? A. The ever increasing price of local cars is driving the customers towards imported cars. Q.7 In your opinion is the heavy burden of tax and inflation factor decreasing the demand of local manufactured cars? A. Yes, continuous increment in government taxes towards local automobile industry is damaging the sales as well as demand is also going downwards. Q.8 What is your opinion about the relationship between currency exchange rate and local automobile industry? A. The continuous devaluation of local currency is leading the automobile industry on the verge of shutting down. Q.9 State your opinion regarding the competition between local and imported cars? A. Local automobile industry is facing tough competition for imported cars in lower segment specially whose prices are below 10 lacs.
  25. 25. 24 | P a g e B u s i n e s s R e s e a r c h R e p o r t Q.10 What is the impact of imported used cars on the market share of local manufacturers? A. Imported cars have successfully captured the local market and now standing at 26% beating atlas Honda who is standing at 14% market share.
  26. 26. 25 | P a g e B u s i n e s s R e s e a r c h R e p o r t Questionnaire About Imported Used Cars 1. Your preference while buying a new car: Local Cars Imported Used/Reconditioned Cars 2. In what ways do local cars provide better customer satisfaction as compared to imported cars? Better Resale Value Cheap Maintenance Cost Wide Dealership Network Availability of Spare Parts 3. Increment in demand of imported cars is due to the lack of technological advancement in local sector. Highly Agree Agree Neutral Disagree Highly Disagree 4. Current prices of local cars are satisfactory. Highly Agree Agree Neutral Disagree Highly Disagree 5. The import of used cars is increasing the competition in local sector. Highly Agree Agree Neutral Disagree Highly Disagree
  27. 27. 26 | P a g e B u s i n e s s R e s e a r c h R e p o r t 6. Our local sector is losing the market due to imported used cars. Highly Agree Agree Neutral Disagree Highly Disagree 7. The comfort level of low priced imported cars is high as compared to same priced local cars. Highly Agree Agree Neutral Disagree Highly Disagree 8. Vast variety of reconditioned cars is driving the customers towards them. Highly Agree Agree Neutral Disagree Highly Disagree 9. Buyers prefer imported cars due to their looks. Highly Agree Agree Neutral Disagree Highly Disagree
  28. 28. 27 | P a g e B u s i n e s s R e s e a r c h R e p o r t 10. Our market has become saturated due to vast import of used cars. Highly Agree Agree Neutral Disagree Highly Disagree
  29. 29. 28 | P a g e B u s i n e s s R e s e a r c h R e p o r t SUMMARY Research issue: Losses to local manufacturers due to imported cars. Main area: Automobile industry The importance of the auto industry for a country cannot be understated. In Pakistan especially, the automobile sector has contributed handsomely to the GDP and is always a popular destination for Foreign Direct Investment. Foreign automobile companies have invested Rs. 10 billion in recent years in the local industry. Research objective: The objective of the research is to reduce the problem of imported cars which is affecting our local automobile industry. Hypothesis: To examine the effects of imported cars on local automobile industry. Literature reviewed: Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) and 3000 automobile parts manufacturers are on the verge of closure as a result of import of 54,000 used cars in 2011-12. (PAAPAM) The leniency granted for the import of used cars due to lack of tariff barriers has flooded the market with cars that are much below standard. These cars are neither beneficial to the economy nor do they provide the customer with any advantages as they cost far more than their actual worth and end up being a liability due to their ever rising maintenance costs. (Protecting Local Auto Industry, Dawn News, 16th July 2002) Industry has already been facing the menace of smuggling, under invoicing and mis- declaration and new proposal will also only result in junk being dumped into the country and not the technology and Pakistan will follow into the footsteps of New Zealand, where the local auto manufacturing industry has been vanished completely. (http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online /business/10- May-2012/no-consensus-on-auto-policy-draft-yet/) For any county, one of the most important economic factors is protectionism but somehow our govt. fails to see this aspect. Instead of providing local industries with the capital, tax benefits and govt. support, it ends up sabotaging a perfectly well-functioning
  30. 30. 29 | P a g e B u s i n e s s R e s e a r c h R e p o r t sector. The biggest example of poor decision making is the permission to import used cars. Importing used cars is a controversial decision and affects Pakistan’s local auto sector immensely. The progress of auto industry seems dim at this point if the govt. does not provide enough support. (http://www.dailytimes.com.pk/default.asp?page=20120624story_24-6-2012_pg5_13) Methodology:  Population: Local Authorized Dealers (Karachi) o Pak Suzuki Motor Company o Indus Motor Company o Honda Atlas Cars Dealers of Imported Cars (Karachi) o Undefined Customers Of Local Cars (Karachi) o Undefined Customers Of Imported Cars (Karachi) o Undefined Pakistan Association of Automotive Parts and Accessories Manufacturers - PAAPAM (Karachi) o Karachi Office
  31. 31. 30 | P a g e B u s i n e s s R e s e a r c h R e p o r t  Sampling: Local Authorized Dealers (Karachi) - Stratified Random Sampling o Pak Suzuki Motor Company - 18 Dealers (15%) = 2.7 Sample Size o Indus Motor Company – 7 Dealers (15%) = 1.05 Sample Size o Honda Atlas Cars (6%) – 6 Dealers (15%) = 0.9 Sample Size Dealers Of Imported Cars (Karachi) - Convenient Sampling Customers Of Local Cars (Karachi) - Judgment Sampling Customers Of Imported Cars (Karachi) - Judgment Sampling Pakistan Association of Automotive Parts and Accessories Manufacturers - PAAPAM (Karachi) - No sampling technique required  Primary data collection tool: o Interview questionnaire Presentation of data: As our data is qualitative (open ended interview questions), quantitative techniques could not be used here. Research findings: There is a significant impact of imported cars on local automobile industry in Pakistan The CBU imports are affecting the employment of workers in auto industry besides that it is also inflicting damage to foreign reserves and national economy. Local auto mobile industry has an edge due to its wide 3s (sales, services and spare) dealership network. Government is supporting the import because it is generating profits for the local government and destroying local auto mobile industry by imposing additional per unit tax. Imported cars are more technologically advance and provide features such as air bags , power windows , better mileage , sound system , automatic transmission , suspension and ac performance by comparing two same price cars.
  32. 32. 31 | P a g e B u s i n e s s R e s e a r c h R e p o r t The ever increasing price of local cars is driving the customers towards imported cars. Yes, continuous increment in government taxes towards local automobile industry is damaging the sales as well as demand is also going downwards. The continuous devaluation of local currency is leading the automobile industry on the verge of shutting down. Local automobile industry is facing tough competition for imported cars in lower segment specially whose prices are below 10 lacs. Imported cars have successfully captured the local market and now standing at 26% beating atlas Honda who is standing at 14% market share. Analysis: As our data is qualitative (open ended interview questions), quantitative techniques could not be used here.
  33. 33. 32 | P a g e B u s i n e s s R e s e a r c h R e p o r t Conclusion: For any sector, government support is necessary. Automobile sector is like the backbone of our economy. Any sensible government always protects this sector as millions of people are directly or indirectly attached with it. But in our scenario, it is totally a different case as instead of providing support; we are sabotaging our own assets as we allowed importing of junk/used cars from abroad. Not only are we creating problems for local auto manufacturers but also damaging our environment. These used cars are the source of income for already well established people who are importing it but bring no benefit for the common man. These cars may be a source of revenue for the government sector but as a whole it is damaging the well structured local sector. As a nation, it is our responsibility to protect our asset because if we fail to protect it, millions of people would be unemployed and then the government will be unable to feed its poeple. If we will continuously ignore it by thinking that all is well then our automobile sector will be on the verge of closure.

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