Pakistan government is pursuing foreign car makers, particularly the European players like Renault-Nissan with generous import duties, as Pakistan wants to shake up its Japanese-dominated car market and loosen the grip of the Big 3 of our market. Locally assembled cars by Toyota, Honda and Suzuki, are sold at relatively high prices compared to the rest of the world but still lag far behind imported vehicles in terms of quality and specifications.
With the economy growing at its fastest pace in eight years, the local currency stable against the dollar and interest rates at their lowest in 42 years, officials believe the country is once again on the radar of foreign investors. The new auto policy, skewed in favor of new entrants, includes offering foreign car manufacturers lower duties as an incentive to set up plants in Pakistan or revive the shuttered ones.
“We expect that there will be one or two foreign investors coming to Pakistan,” said Miftah Ismail, Chairman of Board of Investment (BoI), who has been talking to carmakers about setting up assembly plants for the local market. Ismail said he had held talks with Japan’s Nissan and alliance partner Renault for some time, & met Fiat executives in Italy. Previous discussions also involved Germany’s Volkswagen.
A source close to Renault said Pakistan was under consideration for new production investment, along with other potential locations, but added discussions were at a very early stage. Nissan chief spokesman Jonathan Adashek said: “Pakistan is certainly a market of interest for us at present,” but also added that no final decision had been made as of yet.
BoI’s Ismail said,
“New entrants would be able to import machinery for plants duty free. Customs duty for importing car parts has been set at 10%, while existing players will have to pay 30%. We want greater competition and we expect with greater competition consumers will be offered better choices.”
Local assemblers however aren’t happy with the new auto policy. Pak Suzuki has said it was prepared to invest $460 million in Pakistan, including setting up a new plant, if the government provides the right incentives. It called for changes to the new auto policy, which it said “may damage the tremendous investment potential in the Pakistan automobile sector”.