Premier Motors Limited will assemble Volkswagen and Skoda cars in Pakistan. Premier Motors is a licensed CKD assembly partner of the German automobile mogul, Volkswagen Group. PML has earned a place for itself in the automobile business through its parent company, Premier Systems Private Limited.
The parent company is the only importer and authorized dealer of Audi AG in Pakistan since 2006. Premier Systems Pvt Ltd is also an authorized importer of Audi cars in Sri Lanka and Bangladesh. PML will initially launch premium Volkswagen and Skoda Crossovers and SUVs in Pakistan which will hit the road by mid-2023. The estimated cost of the project is $100 million.
The assembly plant is set up in Hub, Balochistan. It has a manufacturing capacity of 30,000 vehicles yearly. This plant was initially planned to be built in 2019 and start operations in 2020, but this project experienced an 8 month delay because of the COVID-19 pandemic. Construction of the assembly plant has begun in July 2021 and is being done at a rapid pace.
Furthermore, Premier Motors have taken on board AKD Securities as Limited as its financial advisor for this endeavor. Premier Motors has been granted Greenfield status under the Auto Development Act (ADP) 2016-21 for this purpose.
The assembly of Volkswagen’s Sports Utility Vehicles (SUVs) and Crossover Utility Vehicles (CUVs) will be a major boost for Pakistan’s automobile industry. Globally, SUVs are attracting more attention as their market share is increasing. In India, the SUV market share has increased 26% – from 10% to 36% – in the last eight years.
The last three years have been fairly rough for the automobile industry which is one of the most protected sectors of the economy. The automobile manufacturers have always blamed high taxes imposed by the government, that amount to over 40pc of the total price in certain cases, and very low economies of scale as the reason for the sector’s poor track record. In Pakistan, 17 out of every 1,000 people own a car compared to 77 in Indonesia, 281 in Thailand and 70 in India.
The PTI government has made the import of used cars difficult. It has massively reduced automobile taxes in the budget this year to lower their prices. The assemblers have already responded to the initiative and revised down their prices, which is expected to push car sales in the country.
The automobile industry can play a major role in the growth of an economy, but the government has to make sure that the industry’s lust for profit is contained and the middle class is able to afford and enjoy a better ride.