PAGE Blog Business Weekly Magazine
Pakistan has achieved self-sufficiency in bike production and it can become a major bike exporter to at least developing countries for its low cost production. What is actually needed is the official patronage of local producers in terms of incentives and facilities in order to boost bike exports from Pakistan. In 2010, a record 1.8 million motorcycles were manufactured in the country. Its production is still on the rise. In the last one decade, Pakistani consumers in rural areas continued to buy motor bikes. The share of rural areas is over 60 percent in total bike sales, which depend on good yield in various crops. The consumers in urban areas have been interested in purchasing two wheelers in order to reach the place of work more quickly rather than wasting time in traffic congestion.
Afghanistan, Bangladesh & African countries are the markets for Pakistan’s low cost bikes. The illegal bike exports of two wheelers to Bangladesh and Afghanistan are reportedly thriving due to hurdles in legal exports and problems in getting export rebate. The low cost Chinese bike makers have been facing suspension in bike exports to regional countries due to bureaucratic hurdles and influence of a power lobby of Japanese-based automotive association. The government should remove all hurdles and announce incentives to encourage exporters.
Pakistan lacks a comprehensive automobile policy covering two-wheelers. The present automobile policy only covers four-wheelers, hence making it ‘not feasible’ for any foreign company to manufacture bikes in the country. The country is likely to lose a proposed investment of $150 million by Japanese giant Yamaha Motors because of its unclear automobile policy. In 2009, Yamaha Motors announced to establish motorcycle manufacturing plant in the National Industrial Park at Bin Qasim in southern port city of Karachi with an investment of $150 million. Experts say all over the world automobile policy-makers always include four-wheel and two-wheel vehicles in the policy but Pakistan’s policy only covers four-wheelers. If Pakistan includes two-wheelers in its automobile policy, it would have to reduce import duty and taxes on machinery and raw material. Yamaha requested Pakistan to include two-wheelers in the automobile policy and allow foreign vehicle-makers to come and invest, but still no reply has come from the government.
Yamaha had reportedly submitted the proposal with Board of Investment three years ago, but it was facing delays due to confusion about Islamabad’s automobile policy. Japanese company not only wanted to assemble and manufacture motorbikes and engines in Pakistan, but also planned to export these to the Middle East, Africa, Afghanistan and other countries. In the wake of the investment, 25,000 Pakistani engineers and technicians could get jobs in the automobile industry. Besides, many small industries could get a chance to produce auto parts.
Some eight years back, Japan was dominating the motor bike market in Pakistan. Local manufacturing of motorcycles has affected the monopoly of Japanese manufacturers in the Pakistan market. Local manufacturers are actually using the Chinese technology, which has gradually been transferred to them over the past seven years. Chinese motorcycles are making fast inroads in the local market against the Japanese brands. Japanese bike makers have lost their share of the Pakistani market to 51% to the Chinese.
Chinese bike makers have indulged in a controversy with the Pakistan association of automotive parts and accessories manufacturers (PAAPAM) over manufacturing of locally made parts in the 70cc motorcycle engine which means that Pakistan has started producing locally made 70cc bike engines. The PAAPAM claims that 30-40 per cent of the engine parts are being exclusively manufactured by the vending industry. These parts are front and rear shock absorber, piston, crank case, and cylinder.
The Chinese bike makers are the key players in the rapid growth of the local bike industry as they are offering bikes at competitive rates as compared to Japanese makers. The total bike production in Pakistan increased by 12.30 percent to 681,752 units during July-April 2006-07 as compared with 607,084 in the same period of last fiscal year. There were 500,000 motorcycle cycles produced in 2004. By the year 2005, there were 22 motorcycle manufacturing plants in Pakistan, which have increased to 53 now. In the same year, there were 19 plants producing Chinese motorcycles, which have reached to 50.
The strong point of the Chinese bike assemblers has been the difference of Rs 20,000 to Rs 25,000 as compared to Japanese bike makers coupled with attractive colors, extra features and galore of designs. The Chinese bikes are now running side-by-side with the Japanese counterparts on the roads in Pakistan. Even the imported Chinese bikes are also racing neck to neck with Japanese bikes.
Owing to the rising competition with their Chinese counterparts, the Japanese bike makers have slashed prices of various models for improving their sales volume, which have been on the decline for the last many years. The Japanese makers of Honda, Yamaha and Suzuki motorcycles are losing their sales to Chinese bikes, which have started improving their quality. By offering bikes at very competitive rates, the Chinese have captured market in Karachi, the country’s financial and commercial hub. The sale share of Chinese bikes in Karachi has been more than 80 percent.
Market people link the cut in prices of Japanese bikes to the entry of Chinese bikes which created a healthy competition, thus proving beneficial for the end-users to select the bikes as per their pockets and savings. Japanese bikes are still more popular in rural and urban areas of the country but if the Chinese bike makers also reduce prices, they are likely to capture more markets in the country and prove a hard competitor to Japan in motorcycle manufacturing. In past five years, the Japanese bike-manufacturers have been making downward adjustments in their prices. The Japanese bike-makers had begun slashing the prices of their products in September 2004 to attract more buyers. The move was aimed at improving market share and customer base at a place overjoyed over entry of the Chinese bikes, both local and imported. Chinese motorcycles initially attracted customers because of lower rates. The Japanese initially ignored the threat from Chinese brands, but they were then forced to revise downwards their prices. The Chinese brands have now proved their reliability and quality as well that has kept check on the rates of Japanese brands.
