Deletion or Death for Automobile Assemblers

In the year 1972, Pakistan Automobile Corporation (PAC) was formed as a public-sector company to develop the automobile sector in the country. In the year 1983, it formed a joint venture (JV) with Suzuki Motor Company of Japan for the local assembly of cars. Pak Suzuki Motor Company started production in the year 1984. In the year 1986, Hinopak Motors started the assembly of buses and trucks. In the year 1990, Toyota Indus Motor Company started its operations, while Honda Atlas Cars entered the market in the year 1992. These big four Japanese automobile companies (Suzuki, Hino, Toyota, and Honda) continue to dominate the local industry.

Car assembly was started under an agreed deletion programme. Vendor development and local manufacturing of parts were mandated. Imports of CKD (Completely Knocked Down) kits were allowed for assembly. An Automobile Policy was also formulated by the Engineering Development Board (EDB) to regulate the programme and meet local development targets. While the import of finished vehicles is allowed only under the Gift or Transfer of Residence Schemes, with no foreign exchange burden on the Government of Pakistan (GOP), the GOP has to cover the foreign exchange cost of CKD kits. The automobile sector has become a burden that consumes much-needed reserves, mainly because of slow deletion. Combined pressure is exerted by the assemblers to obtain waivers and maximise their profits. Suzuki Maruti entered the Indian market after a delay of about a decade from Pak Suzuki, yet it has achieved above 90% deletion of parts. As a result, the price of the car is much lower across the border and is not affected by changes in the exchange rate.

During my overseas stay, I used to send Gift Certificates for the import of a car to my father to facilitate his transport needs. Upon my return, I obtained a Transfer of Residence certificate for the import of an automobile for my personal use. When I approached the local dealer in 1992, I was informed that I could not import the vehicle as local assembly had started. The GOP was keen on local assembly and the manufacturing of parts in the country. As a result, I was unable to get the car of my choice despite the fact that the price of the car in foreign currency was to be covered by myself. From 1983 to 2026, after over four decades of assembly, the deletion targets have not been met. It is time to revisit the entire programme, both in terms of the number of parts being manufactured locally and their value. The nation’s interests must come first. The target should be 90% deletion by value, which means only a 10% foreign exchange burden. In our case, this burden is much higher as the engine and gearbox are being imported. As the delay has been costly, a final deadline of ninety days should be served on the Japanese assemblers. It should be deletion or death for them; otherwise, the bleeding of our resources will continue unabated.

The market has been so lucrative for the assemblers that several of them have entered it to take advantage of what was once monopolised by the Japanese automobile manufacturers only. South Korea, China, Malaysia, France, and the UK are all here for the kill, at the cost of the captive consumer. In the year 2005, the Consumer Protection Act was passed, under which separate courts were established to provide relief to the public. Instead of expanding the scope of this forum, they were merged with the non-performing and already overburdened judicial system. While the term “Consumer Courts” is still used, most cases are declared non-maintainable and transferred to civil courts as contractual disputes. The prices of automobiles are out of reach, mainly because of the high value of imported parts, as local components are only basic. In the year 2005, Adam Motor Company introduced Pakistan’s first locally produced car, called Adam Revo. Five hundred cars were produced in Karachi, with the understanding that the GOP would order a fleet after the success of the pilot lot, but the order never came, mainly because of pressure from the assemblers who controlled the market. The plant had to be shut down to clear the company’s debt. Till today, the country remains at the mercy of foreign assemblers who consume our foreign reserves.

The trade gap continues to widen. It is time to cut our losses. Agreements must be taken seriously, with strict compliance. The salvation of the automobile industry lies in deletion and the local manufacturing of parts. That was the vision of PAC, under which a foundry was established for producing engine blocks and a factory to produce rims. Millat Tractors is producing engine blocks for its tractors there. It is the only company that has achieved 90% deletion. That is why its product continues to be affordable, as it is not affected by rupee-value parity. Strict enforcement of the deletion programme is vital. The party for the assemblers must come to an end. Deletion or death is the only viable option for the long-term economic sustainability of the nation.