The market structure of the automobile industry in Pakistan is concentrated. In economics term, we can say that it is an oligopoly. An oligopoly is characterized by imperfect competition in which the industry is dominated by a few number of suppliers. Namely, Honda, Suzuki and Toyota. Though the government has had a different perspective when it came to the vehicle sales in the country. The devaluation of rupee has led to the government’s decision of increasing custom duty on imports.
The overall volume of imported used vehicles grew 65% to 76,635 units in 2017 from 46,500 units a year ago. Especially used Japanese imports. A major contributor to this magnitude is the technological advancement of public transportation via Careem/Uber and increase in auto financing by banks boosted the imports of these used cars. The prime minister has left space for foreign automobile companies to setup plants here to settle the trade deficit by decreasing imports.
Chairman of Board of Investment Miftah Ismail said that 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%. The Ministry of Industry and Production allowed United Motors Private Limited which will be investing $18.1 million, Kia-Lucky Motors Pakistan Limited which will make a maximum investment of $372 Million and Nishat Group, investing $164 million, to set up units for assembly and manufacturing of vehicles under the Greenfield investment category.
French carmaker Renault has announced its arrival in the Pakistani market by signing definitive agreements with Al-Futtaim, a Dubai-based firm, for exclusive assembly at a new state-of-the-art plant in Karachi and distribution of Renault vehicles in Pakistan. The plant will be built starting the first quarter of 2018 and sales will begin in 2019.
Ministry of Industries Secretary Khizar Hayat Gondal confirmed that Volkswagen is set to launch its models T6 & Amarok. Even Audi AG plans to invest nearly over $30 million in order to setup the new assembly plant.