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Sunday, April 14, 2024

BMW holds ‘productive meeting’ regarding manufacturing in Pakistan

The ambassador to Germany, Dr Faisal has held a "productive meeting" with BMW officials regarding bringing manufacturing to Pakistan

Dr. Faisal Munir, ambassador to Germany, tweeted earlier today that a “productive meeting” was held between him and BMW officials regarding bringing manufacturing to Pakistan.

This would be a huge leap for the automobile industry in Pakistan.

Pakistan has been, despite making significant strides, stuck in limbo with certain car manufacturing companies that have a strong hold over the market.

BMW may give Pakistan much-needed auto-industry diversity

With the incoming of more car manufacturing companies, this hold can be broken. Allowing for further diversity and choice that a consumer may make.

Pakistan government has been wooing foreign car makers like generous import duties, but convincing them to set up factories has been an uphill challenge.

Pakistan wants to shake up its Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, whose locally assembled cars are sold at relatively high prices but lag behind imported vehicles in terms of quality and specifications.

To do that, analysts say, the government needed to convince manufacturers that the country has turned the corner after the economic slowdown.

With the economy recovering and the pandemic relatively under control, the forex market surging, officials believe the country is once again on the radar of investors seeking to tap into a market of nearly 200 million people.

Officials had given tax exemptions to auto-manufacturers as per a new auto policy, skewed in favour of new entrants, that includes offering foreign car manufacturers lower duties as an incentive to set up plants in Pakistan or revive shuttered ones.

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, and last month met Fiat executives in Italy for the first time. Previous discussions also involved Germany’s Volkswagen. “I hope some people will bite,” he said.

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. In an e-mailed statement, the company said it had “no news to announce at this time”.

Other manufacturers like BMW are also expected to reap the growing potential of the market in Pakistan.

Nissan chief spokesman Jonathan Adashek said: “Pakistan is certainly a market of interest for us at present,” but added no final decision had been made.

Huge market potential

Pakistan’s market is considered not too big as 180,000 cars were sold in the 2014-15 fiscal year.

“The Pakistan market is not big enough,” said Mumshad Ali, Chairman of the Pakistan Association of Automotive Parts.

He added the government’s new policies were probably not bold enough to tempt new manufacturers, nor did they address ways to increase demand, such as lowering sales tax.

The local manufacturing partners of Toyota and Honda did not respond to requests for comment.

Read more: Hyundai Sonata ‘8th gen’ to hit Pakistani markets in 2021

Ali said existing manufacturers felt aggrieved that the government was favouring new investors and believed they should be similarly encouraged to build new plants and expand existing facilities.

Suzuki prepared to increase investment

Suzuki had previously said it was prepared to invest $460 million in Pakistan, including setting up a new plant, if the government provided the right incentives.

Suzuki and Honda have held a strong hold over the local market, with the arrival of BMW in Pakistan this hold may give way to greater diversity.

It had asked for changes to the new auto policy, which it said: “may damage the tremendous investment potential in the Pakistan automobile sector”.

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,” he said.

GVS News Desk