End of Japanese Monopoly: Chinese car set to hit Pak roads
By Muhammad Luqman
Pakistan’s automobile industry , presently dominated by Japanese car manufacturing companies, is set to welcome a new entrant, not from East Asia, but from the neighbouring China. Pakistan’s first-ever locally assembled Chinese car, FAW V2, is going to be available in the market very soon. The company, which is assembling V2, a 1,300cc hatchback, has already been importing it for the last two years.
Al-Haj FAW Motors – a collaboration between the FAW Group Corporation and Al-Haj Motors – has invested Rs1.3 billion (besides its earlier investment of Rs2.5 billion) in car assembly.
This company has been assembling trucks since October 2011 while its plant is also capable of producing light commercial vehicles (LCVs) and passenger cars.
The history of FAW Group Corporation – a Chinese state-owned automotive manufacturing company goes back to 1953 and it has developed various cars in joint ventures with global giants like Toyota, General Motors and Volkswagen.
Pakistan’s automotive industry is historically dominated by Japanese brands in passenger cars, trucks and buses. However, the situation is now changing fast as Chinese companies have started assembling heavy-duty trucks, LCVs as well as cars.
After almost a decade, Korean giants like Hyundai Motor Company and Kia Motors Corporation are re-entering in collaboration with big business groups in Pakistan. The competition is expected to grow as more respected Chinese companies are planning to enter into Pakistan.
However, by the time Korean cars hit the local market in 2019 or 2020, FAW V2 will have an edge over others because the company plans to increase production to 3,600 units annually by the end of 2017 – more than thrice of what it sells currently – and then to 6,000 units.
Some market observers believe Chinese cars could take the market share of used cars as Pakistan currently imports over 45,000 used cars annually.
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“When Chinese motorcycles entered Pakistani market in the early 2000s, people said they could not compete with Japanese brands. We were proved wrong,” a member of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) says.
The biggest beneficiaries of new automobile plants in Pakistan are auto parts manufacturers.
Many foreign automobile companies have committed new investments due to a new five-year auto policy, which was introduced last year.
Moreover, better economic outlook of the country mainly due to over $60 billion investment in the China-Pakistan Economic Corridor (CPEC) has also given an unmatched confidence to the automobile industry.
Industry people expect local companies to produce 0.5 million vehicles – almost double the current numbers – in the next five years or so.
With a growing middle class, Pakistan’s market is expanding and there are opportunities for all. Those companies that cater to the needs of customers will have better chances to grab the market.