Chasing new cars

The Chinese they say have arrived. In the automotive industry, certain Chinese players (JAC motors, Sinotruk, FAW etc.) have already been operating in the commercial light and heavy vehicle category including buses, vans and pickups. But the impenetrable passenger cars market has remained out of reach, even for Chinese auto giants. The new auto policy however has piqued their interest with many making the bid for setting up shop here in Pakistan.

The latest development is the local assembly of Chinese FAW V2 cars that has just kicked off at the Al-Hajj manufacturing plant in Karachi. For those who believe Chinese cars may not find a market here would think twice as FAW has been selling the same car (imported CBUs) over the past few years witnessing a strong growth.

In an interview with BR Research last year, the company chief explained that FAW was making substantial investments in different vehicle categories and was expanding capacity to start producing V2. And FAW isn’t the only Chinese party interested either.

Can FAW create a solid footprint into the auto industry? Can any new company coming in? In the past, several players have tried their luck to enter the industry with no real success. Some could not survive the competition from established Japanese car players, and some made rooky mistakes. Wrong local partners were chosen (Nissan with Ghandhara, Kia with Dewan) resulting in poor management and planning while investments important areas for sustainability such as to indigenize, establish dealers’ network, after-sales market etc. were not made.

There is no doubt that if any of the new players want to stick around for the long haul and really tap into the growing economy that Pakistan is, they will have to commit. As more manufacturers enter the assembly field, better quality and creating long term car-service networks will have to be the primary goals for carmakers. While Chinese FAW may be selling now, if more options—that may even be more affordable—are presented to the target market, people may not associate the same value to these cars as they do now.

If cross country dealerships, parts and repair services and after-sales services are not part of the new carmakers’ investment; Chinese or not, they will simply not be able to fare the competition from seasoned Japanese players who know the ins and outs of the industry and, are also expanding. No doubt, the recent auto policy gives a leg up to new players in terms of concessions in import tariffs and other incentives, but these can only serve as an initial push. The real push and motivation will have to come from these foreign investors—if only they are serious.