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Wednesday, 29 September 2010 08:19

Pakistan needs low priced cars

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India has already launched ‘Nano’ car for $1000, in Pakistan only one Japanese

vendor enjoys monopoly on 800cc cars.

There is no car for the lower middle class in Pakistan.

 

In Pakistan the local assemblers have remained focused in introducing high
priced cars to cater a particular rich segment of the society. Besides, the
Japanese makers, who dominate local markets, perhaps have an understanding
not to roll out low price engine vehicles simultaneously in a market.

 

The dream of Indian people to own the cheapest car is likely to be fulfilled when they will drive away $2,000 or Rs 100,000 Tata’s Nano from July this year on the most congested and chocked streets and roads of their country.
Can our local assemblers, or any other private entrepreneur or the government either really ponder or feel ashamed on this milestone achieved by our neighboring country. Will Pakistanis ever be able to have a low priced car in years to come or they will continue to rely upon Pak Suzuki Motor Company (PSMCL) for providing so called low priced 800cc car which in real terms is no longer cheaper after massive increase in prices in the last one year.
The main aim of Tata Motors of launching the cheap car for the huge urban middle class population is to create an alternative of two wheelers and a more safer and affordable vehicle. The launch of car was also aimed at shifting those people who can afford to have Rs 100,000 cars despite the fact that bikes in India are very cheaper as compared to Pakistan.
Irrespective of some demerits of Nano car like lack of air conditioning, plastic seat covers, no air vents etc in a country where scorching heat takes its toll in summer but one can surely praise the efforts of Tata Motors of rolling out something attractive in terms of price for their countrymen.
Currently, petrol producers and the marketing companies in India have also initiated hectic media campaign to save petrol and diesel for the future young generation. In one of the electronic media advertisements, a boy sitting with his father next to driving seat stuck in a huge traffic jam on a main street watching all the car engines in start position, suddenly cautions his dad that he is thinking of opening a cycle repairing shop in future as the boy feels that the way the people are wasting fuel the young generation cannot have enough petrol to run their vehicles. Then his father switches off the engine vehicle.
In another media campaign, a petrol dealer while filling fuel in a car suddenly surprises a family by saying that from now on there would be 25 per cent off on sale of petrol. The family in the car asks the dealer to repay the balance amount but the dealer replies in affirmative saying if a car runs at a speed of 45 km per hour and if the engine ignition is switched off on red signal then it can easily save up to 25 per cent of petrol consumption.
These are the initiatives being taken by the petrol producers, oil marketing companies, Tata and even the government in India which show that they are concerned how to save fuel for upcoming generation. In Pakistan, there is no such kind of campaigns from any public and private quarters.
It may be recalled here that one of a leading car vendor in Pakistan, Feroz Khan, had dared to provide inexpensive car when he launched country’s first indigenous Revo car, rolled out by Adam Motor Company Ltd (AMCL) in April 2005.
With the production of Revo in 2005, Pakistan had joined the club of 16 countries which produced their own cars. The engine and transmission were the only sub-assemblies which have been imported from China. The starting deletion level was 67.5 per cent which was projected to increase 90 per cent by December 2007. The project, launched at a cost of Rs 400 million, had faced severe financial crunch. Many workers had been retrenched to cut the production cost.
Revo 800cc was introduced at Rs270,000 (petrol version) while 1,050cc car was rolled out at Rs379,000. The installed capacity of the plant was 15,000 units per year.
In 2007, the maker of Revo struggled hard to survive looking for some equity partners to pull the project out of hot water, but efforts proved a failure.
Despite low price and authorized dealership network, the design failed to click the customers perhaps they had a better option in shape of Japanese car Suzuki Mehran 800cc at that time.
Perhaps one of the main reasons of Revo car failure was when the car was launched in April 2005, the government had opened the floodgate for used car imports, resulting in import of 46,000 cars in 2005-06. At that time a used Mitsubishi Pajero Jeep was available at Rs300,000-350,000 then how a new customer could trust a home-grown car.
However, local vendors had given all-out support to the Revo project. Some vendors had cautioned Mr Khan not to take risk in the volatile Pakistani car market by introducing the car from zero level (which means that Revo car design does not exist in other parts of the world).
Transmission Motor Company (TMC) had also introduced green taxi in the name of Alif Motor Cab in which the provincial government had been providing a helping hand.
The green taxi was fitted with CNG at a price of Rs200,500 with 200cc four-stroke engine. It was launched in June 2006. The company had invested Rs45 million in the project and it was rolling out both cars and taxi in collaboration with China. The deletion level had been achieved at 70pc as compared to 67.8pc when the project was launched in 2005. The car used to run 25 km per litre on petrol.
A leading vendor said that producing a car in Pakistan on the basis of Nano would be really be a daunting task for any new investor keeping in view various things between India and Pakistan like exchange rate parity, rate of customs duty and sales tax and level of localization of parts between the two countries.
He said if the same car is launched in our country then it would at least cost very high as one of the main differences is that Tata has totally produced the engine indigenously in India, while there is no engine producing factory in Pakistan. Besides, the Indians are not quality conscious and hence Nano may prove a revolutionary car for the masses.
He recalled that Nawaz Sharif in his previous era had also tried to provide a car at Rs 150,000 with the help of a Russian car maker but the project could not be materialized as Pakistani customers had never liked Russian items and there was no expertise of engine making facility in the country.        
He said Pakistani people have a problem for being very choosy especially in cars as compared to bikes. It is true that low cost Chinese bikes made on the pattern of Japanese Honda CDI-70cc have taken the market by storm due to a big price difference. Over 55 makers are rolling out low cost Chinese 70cc bikes and their parts and accessories are easily available due to mushroom growth of its vendors.
In cars, the new manufacturers, who intend to launch the low priced cars, must be a very sound party of sustaining shocks of various natures especially in times of recession and falling sales. The makers of Revo car might be a big vendor but he did not have a sound backing or name of a known partner either in Pakistan or any of foreigners.
People always hesitate in taking a risk of buying a new car with a new name owing to its low re-sale value and availability of parts besides they might have genuine concerns regarding its quality and car’s high quality suspension of bearing the load of passengers in dilapidated roads and especially reaching the top of any bridges or expressway.
The local people may get some attraction in case manufacturers like Toyota, Honda, Hyundai or any other well known European car makers try to venture into Pakistan by introducing low priced cars. At least customers will have some mental satisfaction about car’s quality, parts availability and re-sale value even if they have to pay higher prices.
People also feel that when they are paying huge amount in six digits then the product should have some worth and be a high quality product. Customers can take risk in bikes as it costs between 38,000 to Rs 63,000 (Chinese to Honda 70cc bikes), but they cannot sustain huge loss of rupees in buying low quality cars.
He said that there is a big difference between sale volume of India and Pakistan keeping in view of two countries’ population. In case a new clicks the mind of people then it means that its demand will pick up and will help in the development of vending industry besides creating job opportunities.
In India, Tata is a big name and many people have blind trust on its reputation despite the fact that it is still working to refinance the two billion dollar outstanding from a three billion dollar bridge loan which the company took to pay for the Jaguar-Land Rover acquisition. 
Irrespective of big names, many people count road presence of any vehicle which definitely creates a feeling among customers. Chinese bikes are classic example of massive road presence as people switched over from Honda to Chinese bikes in huge numbers.
In cars especially, people are also conscious about branded names. When somebody owns an unbranded car like Revo or others then the person cannot stand tall and justify the qualities of low priced cars while chatting with the owners of cars like Suzuki Mehran etc as it excels in quality and high re-sale value.
In Pakistan the local assemblers have remained focused in introducing high priced cars to cater a particular rich segment of the society. Besides, the Japanese makers, who dominate local markets, perhaps have an understanding not to roll out low price engine vehicles simultaneously in a market as only Pak Suzuki has been enjoying monopoly in 800cc segments. The government should now think of creating congenial business environment by ensuring consistency in economic policies and focus on saving fuel. It should encourage European car makers to introduce low priced cars rather than relying on Japanese car makers….

This exclusive article published in monthly AUTOMARK magazine's September-2010 issue.

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Last modified on Wednesday, 29 September 2010 11:19

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