Industry Trend Analysis - Pakistan's Autos Emerging As A Bull Market - JAN 2018
BMI View: Pakistan's automotive development policy will drive strong growth in vehicle production over our 2018-2021 forecast period . This will improve the market ' s reward opportunities and make Pakistan an attractive destination for automakers to set up local vehicle production operations.
Since June 2017, Pakistan has granted four companies permission to establish vehicle assembly or production plants in the country, under the greenfield investment category. The companies that were approved to set up vehicle production operations are United Motors Private Limited, Kia-Lucky Motors Pakistan Limited, Nishat Group and Regal Automobile Industries Limited ( see ' Kia Investment An Upside Risk To Production Outlook ' , December 13 2016 and ' Hyundai Investment Enhancing Local Market Development ' , February 8). We believe that the commencement of local manufacturing by these companies will help drive annual average growth of 11.6% in domestic vehicle production over our 2018-2021 forecast period.
Furthermore, we expect that in 2018, Pakistan's vehicle sales growth will be one of the strongest growing automotive markets globally, thereby supporting the increased investment by automakers. We forecast total vehicle sales to grow 19.8% in 2018 and continue to average 13.6% over our FY2018-2021 forecast period as Pakistan's automotive development policy and its growing consumer base generate a strong tailwind for vehicle sales ( see ' Positive Economic Growth Story To Drive Car Sales ', February 9) .
|Pakistan's Autos Is A Bull Market|
|Pakistan - Vehicle Sales & Production|
|f = BMI forecast. Source:PAMA, BMI|
ADP To Spearhead Production Growth
We believe that Pakistan's Automotive Development Policy (ADP) will increase the competitiveness of the local automotive industry by limiting used vehicle imports and by making Pakistan a more attractive investment destination through lower import tariffs. The ADP will limit used imports by regulating the value of these vehicles and by restricting used vehicle imports to the following schemes:
Personal baggage scheme
Transfer of residence scheme
The ADP will also apply age limits for used vehicle imports of three years for cars and five years for pick-ups, vans, buses and trucks. This increased effort to limit the presence of used vehicles in Pakistan will benefit the demand for new vehicles and increase the appeal of the local automotive market to automakers by driving up the reward potential. Furthermore, the reduction of import duties will lower the cost of producing vehicles over FY2018 and FY2019 (financial year July to June), thereby creating a supportive environment for new market entrants to establish a solid consumer base for its products.
|Note: Completely Built Units = CBU, Regular Duty = RD, Completely Knocked Down = CKD. Source: Ministry of Industries & Production|
|Tariff System For Cars, SUVs LCVs|
|CBU up to 800 cc||50%||50%||40%||40%||50%||50%|
|CBU 801 cc up to 1,000 cc||55%||55%||45%||45%||55%||55%|
|CBU 1,001 cc up to 1,500 cc||60%||60%||50%||50%||60%||60%|
|CBU 1,501 cc up to 1,800 cc||75%||75%||65%||65%||75%||75%|
|CBU above 1,800 cc||100%+50% RD||100%+50%RD||100%+50%RD||100%+50%RD||100%+50%RD||100%+50%R|
|Tariff System For HCV, Buses And Trailers|
|CKD (non-localised) <280 HP||10%||5%||5%||5%||5%||5%|
|CKD (non-localised) >280 HP||0%||5%||5%||5%||5%||5%|
|CKD (localised); all categories||35%||35%||35%||35%||35%||35%|
|CBU < 280 HP||30%||20%||20%||20%||20%||20%|
|CBU >280 HP||15%||20%||20%||20%||20%||20%|
As evidence of the strong reward potential available in Pakistan and the country's fast pace of industry development, the country gets a strong score of 78.2 out of a possible 100 on our Autos Production Risk/Reward Index for its vehicle production growth indicator (which is based on our five-year average forecast). This high score places Pakistan in the top 20 most attractive markets for automakers to begin or maintain autos manufacturing operations globally.