Aspiring for a thriving automotive sector

It was early morning, with the sweet sound of birds and the freshness of the air. After taking a bath, I opened the front door of the lounge and sat in the driver’s seat of my graphite gray 2023 hybrid Kia Niro.

On my way to the office, I saw many electric mopeds and scooters driven by students in shiny uniforms with helmets.

Peshawar Road was bustling with electric vehicles and hybrid SUVs. In some places, I also saw electric three-wheelers with fancy colors and designs.

The noise level was very comfortable, and the air quality felt noticeably cleaner. The city seemed to be embracing a more sustainable and eco-friendly mode of transportation. Young professionals rode electric motorbikes in the extreme left lane of the main road.

I spotted a solar-powered charging station for electric vehicles in the shopping mall parking lot and another by the roadside, with a large electronic display showing three empty stations and one occupied. There were very few fossil fuel vehicles (FFVs) on the road, and I saw only a few Suzuki, Toyota, and Honda cars; the majority were either Chinese or Pakistani.

An electronic display showed the current air quality index, and all indicators were within green limits. My cell phone showed a call from my wife, informing me that she would pick up the kids from school in her newly purchased MG4 EV, as she would be free from shopping by then. It was a relief, as I had a meeting scheduled right after work and wouldn’t have been able to pick them up myself. I saw a family of six getting off a Yutong EV bus at the bus stop.

The bus had a sleek design and looked very spacious inside. Suddenly, I heard a constant beep. I wasn’t sure where it was coming from, and then there was silence and heat. I was sweating in my bed; the fan had stopped due to a UPS shutdown. I had been enjoying a dream that felt so real, but now I was wide awake in my dark room.

“Dreams are dreams, but can this dream be true?” I murmured, trying to shake off the remnants of sleep. I wished my dream could come true, but I knew it was just my imagination.

Pakistan, the fifth most populous country on earth with a massive youth bulge, has an automotive sector on the brink of collapse. Despite immense potential and talent, economic instability and political turmoil hold the country back. Peter Drucker called the automotive industry the “mother of all industries,” but in Pakistan, it is not respected, leading to widespread disruption.

Numerous attempts to revitalize the industry through Automotive Industry Development Programs (AIDPs) have failed to achieve long-term growth and stability. Pakistani scholars have extensively researched the causes of the industry’s poor performance, but merely listing issues has not addressed the root problems.

The government seeks private investors and foreign companies to stimulate growth and stability, while investors seek stable economic policies and a skilled workforce.

A vicious cycle of malice and corruption hinders progress, eroding trust in the government and deterring further investment from international original equipment manufacturers (OEMs). As a result, the country’s economy suffers, and people lose hope for affordable, decent cars for their families.

The domestic automotive industry, despite massive demand potential, seems helpless. The Automotive Industry Development and Export Policy (AIDEP) 2021–2026 was launched to attract investors and boost the sector. Ambitious production targets were set to stimulate growth and create jobs, but results have yet to meet expectations.

Even Thailand, Malaysia, and Indonesia are producing batteries and other accessories for hybrid and electric vehicles (EVs) and are assembling these cars in collaboration with Japanese and German OEMs.

However, in Pakistan, authorities spend too much time planning changes instead of taking concrete actions to implement them. The automotive industry has forward and backward linkages with many other industries, so strengthening it would support the overall industrial ecosystem in the country. This approach would ultimately lead to economic growth and job creation.

Currently, Toyota has started limited assembly operations for the Corolla Cross in the hybrid category, with a price tag of about 10 million PKR. Sazgar Engineering Works Limited (SEWL), in collaboration with Great Wall Motors (GWM), has also offered two locally assembled hybrid vehicles, Haval and Jolion, each priced at around 10 million PKR.

The big question remains: how many customers will be able to afford such high-priced vehicles in a country ranked 52nd among the poorest countries by the International Monetary Fund (IMF)? Although the Pakistani government has given tax incentives to assemblers to encourage the production of electric vehicles, another question arises regarding the affordability of these vehicles for the general public with low to medium income levels.

Are these tax incentives enough to make electric and hybrid vehicles accessible to all income levels in Pakistan?

The AIDEP (2021–26) and National Electric Vehicle Policy (NEVP) mostly focus on granting tax incentives to manufacturers and importers rather than addressing the affordability of these vehicles for the general public with low to medium income levels.

This approach may limit the potential impact of these policies on making electric vehicles accessible to all income levels in Pakistan. To date, no company has shown any interest in assembling buses or trucks in Pakistan, and it is likely this will continue for the foreseeable future.

Research and development efforts in electric mobility are undertaken in silos, with centers established under public and private academic and non-academic institutions.

However, there is still a long way to go for widespread adoption and implementation. The infrastructure for electric vehicles needs significant improvement to support mass adoption. Plans to establish electric charging stations in prominent, easily accessible locations with clear and efficient payment methods have not been undertaken yet. The authorities responsible for such plans are preoccupied with other tasks.

Even for two and three-wheelers, no comprehensive mechanism has been envisioned to promote electrification. China, currently the forerunner in electric mobility, has successfully implemented a battery swapping option for two-wheelers and light utility vehicles.

The current politico-economic situation has put the entire automotive industrial sector in a standstill. From large to small-scale industries, owners are concerned about the future of their businesses due to multiple issues, from energy security to automotive policies. This uncertainty has caused a significant decrease in investments and production levels across the board.

These difficulties have particularly affected Lahore, an important automotive hub in the country. Gujranwala, another major industrial city, has also felt the impact, as the light engineering cluster in the city has experienced a decline in orders and revenue.

The conundrum becomes even more challenging as the population grows rapidly, increasing the demand for automobiles, while the local industry is not ready to capitalize on this situation.

Industrialists look to the government, the government looks to investors, investors look for opportunities, and the cycle continues with no clear solution in sight. As a result, the local industry remains stagnant and unable to grow in the current economic climate.

My dream haunts me every night, reminding me of the potential that is being wasted. Things will never change unless efforts are made to improve them. As Einstein once said, “You cannot solve a problem from the same consciousness that created it. You must learn to see the world anew.” Pakistan’s automotive industry problems must be approached with a fresh perspective and innovative solutions. It’s concerning that past efforts have not yielded the desired results, and it’s time to do something different.

Institutes like the Pakistan Institute of Development Economics (PIDE), Engineering Development Board (EDB), and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) are working to revive the industry with new suggestions.

The need of the hour is to vigorously pursue an action plan to lift the industry out of its downturn. Complex problems do not always require complex solutions. Simple but consistent solutions might help. Stakeholders need to collaborate effectively to find and implement such solutions.

Academia plays a crucial role in providing the necessary research and expertise to find indigenous solutions. The government needs to provide a clear roadmap for selected engineering institutes to undertake research in the automotive sector, especially electric mobility. Sufficient funding and resources should be allocated to support research in areas such as battery technology, control systems, and solar-based hybrid charging stations.

Additionally, the government should formulate policies to attract foreign direct investments without unduly protecting existing market players, who have not delivered as expected for the last four to five decades. The industry should focus on two/three-wheelers and small cars to meet market demand.

Business communities and chambers, aware of the significance of global markets and export orientation, should encourage small and medium enterprises (SMEs) to set goals and provide the necessary help to achieve sustainable growth in the automotive industry.

Dreams do come true if you work hard enough to make them a reality. India, Malaysia, and Thailand are examples of countries that have successfully implemented policies to support their automotive industries (especially SMEs making auto parts) and realized their dreams of becoming major players in the global market. Their citizens have better transport choices and job opportunities.

A thriving automotive sector promotes economic growth and innovation, creating a positive ripple effect across other industries. When the “mother” of industries is respected, the entire economic “family” benefits and thrives. Dreams become more achievable, and relationships are strengthened. I wish and hope that someday, when my son wakes up, he finds the roads as I have seen them in my dream.

Copyright Business Recorder, 2024