KARACHI: Localisation is poised to assume even more prominent role in the country’s automotive industry, as IMC plans to reach 60% levels in the near future, especially intensifying its efforts for localisation in the Hybrid SUVs segment. This landmark shift promises to strengthen the domestic industry, reduce import dependence, and unleash a new wave of job creation and technology absorption.
With global markets becoming increasingly competitive and consumers demanding more customised products and services, automotive companies will intensify their investments in localisation efforts.
In Pakistan, the launch of the country’s first SUV with the highest local content will further reduce import costs, create jobs, and increase technology transfer, along with a substantial share of its components originating from local suppliers.
“Despite challenges, there are many reasons to be optimistic about the future of localisation in Pakistan’s automotive industry,” said Aamir Allawala, CEO Tecno.
He said that the government is committed to supporting the industry, and there is a growing interest from foreign automakers to invest in Pakistan.
“With the right policies in place, Pakistan can become a major producer of auto parts and vehicles. This would have a significant positive impact on the Pakistani economy, creating jobs, boosting GDP growth, and reducing reliance on imports,” said Aamir.
According to a report by the Pakistan Automotive Manufacturers Association (PAMA), the average localisation rate for cars and light commercial vehicles (LCVs) in Pakistan was 55% in 2021.
This means that 55% of the value of these vehicles was generated from locally produced parts. The localisation rate for trucks and buses was lower, at 30% currently.
“There are some challenges that need to be addressed, such as the need for investment in technology and infrastructure and development of skilled workforce,” he said.
He further added: “The existence of the raw materials industry is a key driver for the auto sector to deliver its full potential of indigenization and value addition. Unfortunately, the Pakistan vendor industry has no option but to import raw materials for manufacturing its steel, plastic, rubber, aluminum, and glass components. This results in a significant disadvantage compared with countries like India, Thailand, and Indonesia. The Government must create incentive packages for large-scale foreign and domestic investment in raw material production in the country as it would lead to additional depth in local production of automobiles and their parts.”
He said that the prospect of foreign investment by automakers in local production facilities holds immense promise as the influx of investment would facilitate the transfer of valuable technology and skills from international players, contributing significantly to the development of Pakistan’s domestic capabilities.
Ultimately, he said, this enhanced competitiveness on the global stage would elevate Pakistan’s standing in the international economy.
“The government of Pakistan can play an important role in supporting the localisation of the automotive industry by providing tax breaks and other incentives to automakers, and by investing in research and development.
“This resolute commitment to localisation mirrors the wider industry trend of fortifying the domestic supply network. Pakistan is fervently working towards enhancing self-sufficiency and competitiveness in its automotive sector,” said Aamir.
Copyright Business Recorder, 2024
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