The Indus Motor Company (IMC) Chief Executive Officer Ali Asghar Jamali has urged the government to ensure that new entrants are persuaded to adopt localization as soon as possible as compared to imports at concessionary rates. He stated this while talking to a group of journalists.
It is in the interest of the car manufacturers to have maximum parts made locally and for last 30 years original equipments manufacturers (OEMs) have come a long way to establish vendor and engineering base in Pakistan, he said. He said full potential of job creation can only happen if these engineering companies supplying parts to OEMs are encouraged and supported as it has proven to be the real engine of growth in auto sector. In developed countries with strong vendor base, one job created at OEMs results in multiplier effect of 10 more jobs across value chain, he added.
Jamali said the auto sector can help government achieve its targets for economic growth if provided with transparent and consistent policies. It needs to deepen localization base through incentives and protect local manufacturing to secure foreign exchange and employment generation.
The IMC chief said that the impact of devaluation on localized parts is less than the imported parts thus the price of locally made parts is comparatively lower than imported parts besides a hassle free supply chain.
"It is because of this advantage that car manufacturers have actively encouraged their vendors to develop maximum local parts for different variants," he said. He urged the government to give incentives to vendors in order to prepare them for facilitating the new entrants, as well support them by protecting their investments, employment and process by adding all locally made parts in SRO 693.
If government ensures inclusive growth of vendors, encourage them with incentives for localization to compete with new entrant CKD rates, the local vendor base will broaden and their services will be extended to new entrant, which unfortunately is not the focus of current Auto Policy, he added.
He said now the vendors have acquired state of art engineering technologies to produce precision parts and the auto components made by Pakistani vendors comply with best international standards. "The parts they are producing now are deemed fit for use at any global manufacturing facility of the Japanese models," said Jamali.
Quoting an example, he said during floods in Thailand and nuclear reactor mishap in Japan all the Japanese car manufacturers approached Pakistani vendors for some components.
"This has helped local vendors to scale up and be prepared for next opportunity that may come their way in future for supply of parts overseas," he added. IMC chief further said the restriction of vehicles' sale to non-filers is hurting the local industry in a great deal. Just when auto policy was bearing fruit, this decision has halted the growth. As per available data, the demand of vehicles is continuously declining for last couple of months.
The production of 1300cc came down by 13-percent in November and around 43-percent in December as compared to October last year. Similarly, the production of 1000cc was declined by 35- percent in December last year as compared to October 2018, he added.
He said that in developed economies, around 13.3 million Europeans, or 6.1 percent of the EU employed population, work in the automotive sector. The turnover generated by the automotive sector represents 6.8 percent of EU's GDP. In Germany alone, every seventh job is "directly or indirectly" linked to the sector and contributes around 14 percent of German GDP.
He appreciated the recent decision taken by government on used cars. He said that it will not only encourage new investments and entrants but will also help government to have check on grey economy that has resulted in issues like FATF.