IMC will invest Rs 1.6 billion to indigenise body parts

Pakistan's leading car manufacturer, Indus Motor Company (IMC), has plans to further invest Rs 1.6 billion to indigenise body parts, such as doors, bonnets, and rear bonnets, a spokesman of the Company told Business Recorder here on Saturday.
This investment will further enhance transfer of technology, create more employment opportunities and, above all, foster localisation of parts, he said, adding that the Company has already achieved a record production and sales targets of 50,557 and 52,063 units respectively as compared to the production of 34,298 units and sales of 35,276 units in the previous year. The IMC is continuously increasing its production capacity through investments and productivity to meet the increase in demand, he said.
Needles to mention, Pakistan's auto market offers great untapped potential, which can be utilised for the growth of national economy. The importance of this could be gauged from the contributions that the auto sector has made to the GDP in terms of sales revenue, which stood at Rs 76.4 billion in 2008-09. Every year, the sector contributes billions of rupees to the national exchequer. In 2008-09, it contributed more than Rs 31.5 billion in the form of taxes alone.
Out of the world's top 10 car manufacturers, four have set up manufacturing facilities in Pakistan with huge investments. These manufacturers have bolstered the local Original Equipment Manufacturer (OEM) sector by setting up units to produce major foreign brands. In doing so, they have provided foreign exchange equity and have also leveraged technology transfer through joint ventures and Technical Assistance Agreements (TAAs). This has made a big difference for the local industry as processes and production methods employed by the local auto and parts manufacturers are now in line with global best practices.
At present, the auto industry provides direct employment to about 150,000 people. In numbers, the direct impact of the industry on Pakistan's engineering sector includes business for 400-plus auto parts manufacturers (Tier 1), plus 1,600 other parts manufacturers (Tier 2) supplying to Tier 1 units.
The investment in the auto sector by local OEMs and auto vendors has crossed Rs 100 billion while the industry alone invested more than Rs 3.8 billion in its operations during 2008-09.
Localisation efforts have been undertaken for cost-saving, and this effort still continues. Furthermore, the Engineering Development Board (EDB), the OEMs and the vendors are continuously in talks for further localisation of additional parts with the objective to reduce the overall cost. There is a perception that localisation efforts have not taken place, and the industry is mostly based on imported components, while the reality is that there has been a healthy increase in the localisation levels over the years, according to Pakistan Automobile Manufacturers Association (PAMA).
It would be unfair to say that cars produced in Pakistan are inferior as comparerd to the cars produced in other parts of the world. As a matter of fact, all local parts are approved by the OEMs' foreign principals, and the local cars are built on international standards of quality. Locally manufactured parts, such as air conditioners, wire harness, shock absorbers, struts, stamping parts, die casting and machining, rubber, plastics, electronics, and seats have already been localised.
Local manufacturers have requested the policy makers to formulate balanced policies which would help develop the local industry in a reasonably protected environment while offering it room for healthy competition. Due support to the local industry would enable it to bring the operations to a level that would warrant transfer of better technology, and would result in shifting the standard for the whole industry.