Report on

Automobile Industry of Karachi

Date: 7th April, 2017

Course: Analysis of Pakistan Industries

Section:

Submitted to: Sir Chaudhry Muhammad Zubair

Submitted by: Muhammad Moeenuddin (15632)

Abdur Rehman Zubairi (15629)

Syed Hamza Arif (15606)

Rabia Ajmal (15586)

Shuja-ur-Rehman (16425)
OVERVIEW OF PAKISTANI AUTOMOTIVE INDUSTRY

The history of Pakistans Automotive Industry is one of the oldest in the Asian
countries. The Industry started semi knockdown production of trucks
(Bedford) in 1949 by General Motors, which marked the start of the
industrys history after the independence from British India. From this year
onwards the Industry has not shown steady growth and thus lags behind and
is overtaken by other countries in Asia. Trade liberalization has not been
supported by the automotive industry of Pakistan, which has led to
consumers facing higher prices, low quality standards and inadequacy of
competition in this sector. Being the sixth largest manufacturing subsector of
the economy the automobile industry employs 3.5 million workers and
contributed 2.8% to the GDP in the year 2015/16. It should be noted that
Pakistan falls in the category of the few manufacturers in the world who are
producing or assembling all kinds of vehicles, ranging from trucks & buses,
2/3 wheelers, motorcars, prime movers, tractors and LCVs (light commercial
vehicles).

Phases of Automobile Industry:

Pakistan auto industry observed a Preparation Phase 1985-05 which

was based on the formulation and implementation of compulsory local
content conditions, commonly referred as deletion programs.

The Preparation Phase 1985-05 observed couple of car assemblers and

dozens of 2/3-wheelers coming into operation. The economic objectives of
that time i.e. import substitution, job creation and investments in OE and
vending sectors were achieved to a large extent.

The auto industry has recently entered into a Development Phase

2005-12 where the consolidation of initial achievements has started taking
place alongside the development of strategy to Perspective of Pakistan Auto
Industry 2 2 Perspective of Pakistan Auto Industry 6 Auto Industry
Development Programme shape the industry in the new competitive
environment

By the start of Global Era Phase the industry is expected to achieve the
scales due to high production level duly supported by the size of GDP of
$210 Billion by 2012 and per capita income reaching to $ 1,300.

BODIES:
The main associations in the sector are:
 1. Pakistan Automobile Corporation (1973) was founded as a result of the
governments efforts towards organizing a body to promote the
industry.
2. PAMA (Pakistan Automotive Manufacturers Association)
3. PAAPAM (Pakistan Association of Automotive Parts and Accessories
Manufacturers)
4. APMA (Association of Pakistan Motorcycle Assemblers)
5. Engineering Development Board (EDB) maintains data about the
automotive industry.

MARKET STRUCTURE
The market structure of the automobile industry in Pakistan is concentrated.
In economics term, we could say its an oligopoly, which is characterized by
imperfect competition in which the industry is dominated by a small number
of suppliers. This is because the auto industry is highly capital-intensive
requiring high investments and the products are expensive. Hence the
barriers to entry are high resulting in the presence of limited number of
suppliers. Moreover, the market can also be categorized as price-oriented.
As cars are luxury items, especially in developing countries (Pakistan being
one of them), the demand for them is elastic. Any prices change affects the
sales of the company to a great extent. The market had a production
capacity of 751,887 units in 2015-16 but is a fairly concentrated market with
only eight models accounting for all the car sales in the country. These
models are made by three Japanese firms namely Honda, Suzuki and Toyota.
KARACHI BASED AUTOMOBILE MANUFACTURERS/ASSEMBLERS:

1. Indus Motors Company Ltd

2. Pak Suzuki Motor Company Ltd

3. Dewan Farooque Motors Ltd (Defunct since 2009)

4. Ghandhara Nissan Ltd (Defunct since 2004 for sedan vehicles Only
produce HCVs now)

5. Master Motors Ltd

INDUS MOTOR COMPANY LIMITED

Indus motors is a joint venture amongst the house of Habib (50% equity),
Toyota Motor company (12.5%) and Toyota Tsusho Corporation (12.5%)
initiated in December 1989 for the assembling, progressive manufacturing
and marketing of Toyota vehicles in Pakistan. IMC is also the sole distributor
of Toyota vehicles in Pakistan.

The manufacturing facility and offices are located at a 105 acre site in Port
Qasim, Karachi, while the product is delivered to end customers nationwide
through a strong network of 43 independent 3S Dealerships spread across
the country.
LEGAL STATUS Indus Motor Company Limited equity
shares are listed on the Pakistan
Stock Exchange.
BEGINNING OF OPERATION 1993 MAY
REGISTRATION YEAR IMC was incorporated in 1989
DECEMBER
LARGEST PORTION OF SALE
57,452-TOYOTA COROLLA
ANNUAL SALES 2015-16
64,584 UNITS
CAPACITY UTILIZATION
54,800
Total no. of Employees
2700
Power Generating Units 2 Gas Engines + 1 Gas Turbine
(1.44 MW)
5 Diesel Engines (1.80 MW, 1
MW, 0.8 MW)

PAK SUZUKI MOTOR COMPANY LIMITED

This company was the first passenger car manufacturer in the industry. It is a
joint venture between Pakistan Automobile Corporation Limited (PAC O) and
Suzuki Motor Corporation (SMC)-Japan. The former party represents the
Government of Pakistan. The company started commercial production in
1984. The company was privatized in September 1992.

Pak Suzuki Motor Company (PSMCL) is a Pakistani affiliate of Japanese

automaker Suzuki. It is the Pakistani assembler and distributor of cars
manufactured by Suzuki and its subsidiaries and foreign divisions.

Founded in 1983
Begin operation in 1984
Status of the Company: Listed on Pakistan Stock Exchange Ltd.
Highest selling Cars: Mehran, Cultus, Bolan.
Total Annual Cost: Rs. 16.4 Billion
 Production Capacity: 150,000 per annum for Cars and LCVs and 44000
per annum for Motorcycles.
Total Number of Employees: 1200 Permanent 500 contractual

Operating Results | Years 2016 2015

Production in Volume(Nos.)

Motorcar 111,979 134391

Motorcycle 18,374 19,610
Sales Volume(Nos.)
Motorcar 110,000 133,952

Motorcycle 17,946 20,617

Sales Revenue (in Rs.) 76,516,040 84,548,757

Power Generating Units: 8 (diesel)

Performance (2016-2015)

Master Motors

Master Motor Corporation Limited (MMCL) is an ISO certified automobile

assembling; manufacturing company formed in 2002, and is part of Master
Group of Companies.

MMCL is authorized assembler/ manufacturer in Pakistan for leading

Commercial Vehicles from Japan & China including world renowned Mitsubishi
Fuso and Foton. It is producing a wide range of Commercial Vehicles from 1.5
Ton loading capacity to 60 Ton GCW Prime Mover. More than 10,000 Master
vehicles sold give us a very strong commercial base both in public and
private sector organizations.
Master Motor has one of the largest after sale service network across the
country ensuring a strong customer trust in result of prompt and efficient
support to our valued customers. Whereas our Mobile workshops are
strategically positioned to ensure at the spot services whenever and
wherever required. MMCL is focused on creating a strong and long term
business relationship with its customers by providing them an efficient and
economical solution.
LEGAL STATUS Private limited company

BEGINNING OF OPERATION 1963

REGISTRATION YEAR Incorporated in 2002
LARGEST PORTION OF SALE
Trucks
ANNUAL SALES 2015-16
890UNITS
CAPACITY UTILIZATION
5500 units 16%
Total no. of Employees
244 permanent 130
contractual
Power Generating Units

NISSAN MOTORS:
Ghandara Nissan was incorporated in 1981 as a private limited company
having the sale licensee for the distribution of Nissan vehicles in CBU
condition in Pakistan; later in 1992 it was converted into a public company
listed on the Karachi Stock Exchange. Ghandhara Nissan has technical
assistance agreement with Nissan Motors and joint venture agreement with
Nissan Diesel Company for the progressive assembly of passenger cars, light
commercial vehicles and heavy duty vehicles. Ghadhara Nissan's plants are
located at Port Qasim, Karachi, adjacent to each other. Ghandhara Nissan is a
group company of Bibojee Services.

Founded in 1981
Begin operation in 1982
Total number of employees: 500
Status of the Company: Listed on Pakistan Stock Exchange Ltd.
Highest selling vehicles: UD trucks UNIFLOW diesel engine commonly known
as two stroke engine
Total Annual Cost: Rs. 2,169,378,000
Production Capacity: 6,000 vehicles on single shift basis per annum

OPERATING YEAR 2016 2015

Rupees in thousand (000)
PRODUCTION VOLUME
TRUCKS
SALES VOLUME
TRUCKS

SALES REVENUE 2,649,675 5,445,392

Power Crisis and Automotive Industry:

Government brought down electricity outage span for industrial

consumers to zero within the past three years, a senior official said
on Monday.

With concerted efforts there has been considerable decrease in

load shedding in the country... For Industrial consumers the load
shedding has become zero, said Younus Dagha, secretary water
and power at a meeting of the economic coordination committee of
the cabinet (ECC)

In a statement released by KESC, the utility has emphatically stated

that it was only KESC that adopted an industry-friendly policy and
exempted all industrial zones from load shedding since September
2009. While Karachi industry was enjoying uninterrupted power
supply, rest of the industry in the country was facing huge power
outages resulting in substantial economic gains for Karachi
industries. A study, conducted by renowned international consulting
firm Mckinsey, confirms that uninterrupted power supply to Karachi's
industrial units has resulted in an economic value add of 1-2 Billion
US dollars per annum.

Overall Industry Statistics

Key DIRECT Determinants:

ECONOMIC FACTORS
PRICE & DISPOSABLE INCOME:
CAR LEASING, FINACING:
INSTITUTIONAL DEMAND

Key INDIRECT Determinants:

POPULATION GROWTH
DEMOGRAPHIC SHIFT
STATE OF THE TRANSPORTATION SYSTEM
MOTOR INSURANCE SITUATION
INCREASE IN SMUGGLING

INCONSISTENT GOVERNMENT POLICIES:

The auto industry expressed resilience during the last 1 year when it
switched over from compulsory local content conditions to a TRIMs compliant
tariff based system (TBS) which came into effect on 1st July, 2006. The
changeover was relatively hassle free for the assemblers but has posed
many challenges to the vendors who remained comfortable in the previous
system and are now pushed to improve the quality, supply systems, shop
floor efficiencies and better marketing.

Automakers devise investment plans as CPEC

strengthens the automobile industry
Promising better return on investments by upturning Pakistans economy, the
China-Pakistan Economic Corridor (CPECP) has spurred investment in various
fields if industrial production including the automobile sector. Pak-Suzuki &
Dewan Motors have devised investment plans for expanding their capacity
and improving quality. The plans will be shared with government to be
considered for incentives as offered to new entrants.
China-Pakistan Automobile Partnership
New investors who have decided to invest in Pakistan include Regal Automobile Indus
Ltd., United Auto Industries Ltd and privately TM Habib Rafiq (Pvt) Ltd, in collaboration
with various other Chinese companies.

Government sources say that the Regal Automobile Indus Ltd has decided to invest in
the auto-sector in collaboration with the company PDF S Motors and United Auto
Industries. Similarly, Habib Rafiq (Pvt) Ltd has decided to invest with Jean Van Dong
Dong motor cycles and vehicles in cooperation with another company.

Profiles:

Sources:

http://www.ravimagazine.com/analysis-of-pakistani-automobile-industry-a-
report/

PAMA (Pakistan Automotive Manufacturers Association)

Business Recorder

The Nation

http://www.cpecinfo.com/cpec-news-detail?id=MTUzNw==

https://propakistani.pk/2016/11/28/china-invest-pakistans-automobile-sector/