Engineering experts claimed that local tractors completely dominate the domestic market as compared to imported tractors because they are competitive due to usage of a large number of local parts. If the same practice is adopted by car manufacturers, it will bring down the prices, they suggest.
They said country produces two famous global brands of tractors, which are priced much lower than the brands of India and China. This is the reason that foreign tractors have failed to make a dent in the Pakistan market, even though imports are allowed at zero duty. They said even the subsidy being provided by the federal government on purchase of both local and foreign tractors has failed to reduce the demand for local tractors. Farmers are opting for local brands as after equal subsidy they are much cheaper than imported ones.
The experts said the efficiency and competitiveness of local tractors is the result of usage of more than 90 percent local components while the maximum deletion level in cars is stagnant at 70 percent. For most of the car brands, local parts comprise around 40-50 percent.
All critical parts are imported, as major assemblers of cars are hesitant to encourage deletion of hi-tech parts in Pakistan. They further said local parts are much cheaper compared to imported components. Import data reveals that even in cars, which have deletion level of 70 percent, the 30 percent imported components are costlier than the 70 percent local components. In the case of tractors, the country saves around 80-85 percent of foreign exchange, but in case of cars the cost of imported components accounts for 75-85 percent of the total cost of the vehicle. Saving in terms of foreign exchange is only 15-25 percent.
All major car assemblers of the country are foreign companies. It does not matter much for them if the car is imported from their principal plants or assembled in Pakistan. The auto parts industry is well placed to develop hi-tech parts provided the car assemblers place firm orders with them. Unlike tractors, the government has imposed protective duties on cars in a bid to protect the local auto-vendor industry and in the hope the deletion level will increase.
The car assemblers are benefiting from this protection and have kept car prices extremely high. The auto parts makers urged the government to take measures to force the assemblers to go for a higher deletion level. Lately, car parts manufacturers have started concentrating on export markets.
Last fiscal year, auto parts' exports increased from $32 million to $52 million. They, however, are exporting only low value added components as they have not been provided a chance to produce hi-tech parts. They point out the Indian government has adopted a strict policy on deletion which has paid dividends.