Congratulations are in order. The fruits of labor of this bureaucracy are finally paying off and with the partnership of the local conglomerate Nishat group, Hyundai cars will soon be seen on the roads of Pakistan. This news comes from a direct message to shareholders by Nishat Mills, the renowned textile company that has entered a joint venture deal with Hyundai Motor Company (HMC). The ceremony of the announcement happens today.
While soon may not be too soon as greenfield plants take a while to be set up, this is indeed the first success story of the auto policy that came out in April of last year. After much speculation of which players could be arriving into Pakistan—European carmakers were yearned for—proposals were rejected, agreements were called off and the government gave its go-ahead to only a handful in which Nishat and Lucky (with Kia) are prominent. Both now have officially signed off with the government with an estimated combined investment of $250 million.
It isn’t news that Hyundai has been in Pakistan once before, last time with Dewan Motors but the assembly of those cars had to be discontinued as Dewan Motors hit financial snags and demand drew to a close. However, Hyundai was a popular car, selling on an average of 7,000 units annually between 2004 and 2006. The new deal will bring Hyundai cars—in the range of 1000cc to 1300cc—as well as commercial vehicles to Pakistan.
The company is South Korean and also owns 32.8 percent stake in its subsidiary Kia Motors making the Hyundai/Kia duo the third largest automakers in the world, just behind Toyota and Volkswagen.
Though they say starting a manufacturing plant in the automotive industry is not easy, once established, the partnership with Nishat could yield a major competitor for the existing automakers. Nishat Mills is the flagship company of the Mansha owned group, which has its hands in a variety of sectors ranging from textiles, banking, cement, and power.
What’s left is how much preparation and additional investment the group will put in once they start the assembly. How much modernization they would be willing to bring and whether they would keep up with the appetite of the growing car users in Pakistan, and give a healthy competition to the three carmakers that have monopolized the space to bring down car prices.
Demand is certainly on their side so growing to scale may not be a problem. With used cars standing at 70,000 units annually and locally assembled cars at about 180,000-200,000, the car penetration in Pakistan is significantly below average. Pair that with improved and cheaper auto financing facilities, lower barriers to entry and favourable regulatory policy, the space is there for new players. Let the games begin!