AUTO INDUSTRY PAKISTAN

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AUTO INDUSTRY - PAKISTAN
By ZAHID J. YAQUB General Manager (Policy Dev.)

• Engineering Development Board
• Ministry of Industries, Production Special
  Initiatives

23-11-2007
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Engineering Development Board

• MISSION STATEMENT
• Strengthen the Engineering sector and integrate
  it with the world market to make it the driving
  force for economic growth.

• 3 Cs
• Connect
• Consultation
• Consistency

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Auto Industry A Perspective
2012-Onwards
1985-2005
2005-12
Period of Preparation
Global Era
Development Phase 5 Years

• Switching over to TBS
• Capacity expansion and competitive production
• Encouraging further localization
• Incentivizing technology acquisition
• Human Resource Development
• Cluster Development
• Encourage FDI
• Global Integration

• Deletion Programmes leading to Progressive
  localization
• Protection through high tariffs
• Penalties for defaults
• Positive Impact
• Vendor Development
• Localization
• Import substitution

Pakistan to have a global positioning
To become a Regional hub
By enhancing high value added production
Tier 1 And Tier 2 vending industry in place
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Vehicle Production
Aggregate Compound Growth Rate (ACGR)
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Projections Auto Industry
2006-07
2011-12
160,000 Cars
Capacity
500,000 Cars
839,224 Motorcycles
1.7 Million Motorcycles
Capacity
Rs 225 Billion
Investment
Rs 98 Billion
5.6
2.8
Contribution to GDP
Contribution to Manufacturing
16
25
Rs 190 Billion
Contribution to indirect taxes
Rs 63 Billion
Rs 600 Billion
Gross Sales Turnover
Rs 214 Billion
Direct Employment
250,000 Nos
192,000 Nos
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Regulatory Environment

• From Compulsory Local Content to Tariff Based
  System (TBS)
• SRO 655 (i) / 2006
• Duty rates on raw material 0, sub-components 5,
  components 10, Sub-Assemblies 15.
• SRO 656 (I) / 2006
• Compulsory minimum in-house facilities.
• EDB to certify lists for import of components.
• Maintenance of records.
• SRO 693 (I) / 2006
• To implement TBS through levy of additional
  customs duty.

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Auto Industry World Overview
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Challenges

• Quality customer service issues.
• Under valuation and misdeclaration of imports.
• Development of critical components low local
  content level.
• Vendor support and development.
• Capacity expansion.
• Innovation and Technology Up-gradation.
• Human Resource Development.
• Standards, certification emission controls.
• Exports Auto industry import dependent.

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Investment Opportunities - Auto Sector

• Investment Opportunities in Component
  Manufacturing

Details
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Objectives of AIDP

• To provide Policy framework for Auto Industry to
  facilitate
• Long term investment,,
• Encourage growth,
• Domestic competition,
• Enhance competitiveness,
• Stimulate innovation.

• Ensure sustainability of local manufacturing
• Used vehicles import policy will be regulated to
  sustain growth of local industry while protecting
  consumer interest.
• Encourage further indigenization.
• Facilitate Auto Industrys integration into
  Global Supply Chain.

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Pillars of AIDP

• Five Year Tariff Plan.
• Auto Cluster Development
• Technology Acquisition Support.
• Human Resource Development.
• Incentive for higher value indigenization.
• Penalty for not achieving further indigenization.
• Institutional Mechanism including industry
  representatives for regular assessment and review
  of progress under Policy.

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Five Year Tariff Plan For Cars/LCVs - Approved
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Five Year Tariff Plan For HCVs - Approved
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Five Year Tariff Plan For Agriculture Tractors
Motorcycles - Approved
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Components and Assemblies to Be Localized in Five
Years
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Technology Acquisition Support Scheme

• Objective
• To further indigenize components and improve
  quality.
• To improve innovation and processes.
• Eligible Entities
• Auto part manufacturers must be supplying or
  contracted to supply to vehicle assemblers or
  export market.
• Must be registered with SECP.
• Should have suitable in-house facilities to
  manufacture auto parts.
• Incentive in the form of matching grants.

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Productive Asset Investment Incentive

• Objectives
• Expand and modernize capacities in auto parts
  manufacturing.
• Encourage further localization of auto parts.
• Promote interdependence between assemblers and
  auto parts manufacturers.
• Incentive
• Duty credits as percentage of value of productive
  assets installed by eligible auto parts
  manufacturers spreading equally over a period of
  5 years to offset duty on eligible imports.
• Duty credit will be transferable to vehicle
  assemblers and will remain non-tradeable in open
  market.

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Human Resource Development

• Mission Statement
• To set-up a system to develop on a sustainable
  basis, competent and multi-skilled personnel to
  meet the growing needs of Auto Industry .

Need of Industry

• Focused and specialized effort through dedicated
  institutions for the training of manpower and
  management of the Auto Sector.
• Close collaboration with established institutions
  such as HEC, NAVTEC, VTCs, Polytechnics, TUSDEC,
  TEVTAs etc.

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Faculty

• Both foreign and local experts with extensive
  working experience and academic qualifications.

Auto Industry Skill Development Company

• Steer initiative on HRD on sustainable basis
  through Centres of Excellence.
• The Company will be managed by a Board with
  representatives from government, industry, HEC,
  NAVTEC, management schools etc.

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Auto Industry Investment Policy (AIIP) HCVs
Agriculture Tractors

• Companies producing at least 25,000 units of
  trucks and buses separately , 40,000 units of
  LCVs, 500,000 units of cars and at least 50,000
  units of agriculture tractors annually in
  countries other than Pakistan will be eligible
  for new entrant benefit.
• Benefit 100 CKD kit at customs duty applicable
  to the import of components not manufactured
  locally, for a period of three years from the
  start of assembly.
• New entrant will submit a business plan,
  delineating the yearly localization plan with
  substantive evidence, subjected to yearly
  scrutiny.
• AIDC will determine the eligibility of new
  entrant.

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Auto Cluster Development
Need for Auto Clusters To address fragmented
location of vendors and lack of mutual support,
learning and sharing certain common, otherwise
under utilized capacities through Cluster
Development.

• Two Auto Clusters Proposed
• Near Steel Mills, Port Qasim, Karachi.
• Near Motorway on Sheikhupura Road, Lahore.

• Area
• Karachi 200 Acres.
• Lahore 140 Acres.

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Auto Industry Development Committee

• AIDC having public private partnership being
  notified shortly to coordinate implementation of
  AIDP.
• AIDC will have continuous deliberations on
  competitive development of auto industry .
• Deliberate on emerging global trends and issues
  of quality, standards, environment and consumer
  satisfaction.
• AIDC will conduct an annual assessment and a
  comprehensive review on the implementation on the
  AIDP after 5 years.

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THANK YOU
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Investment Opportunities - Auto Sector
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