With China poised to surpass the United States as the world's largest automobile market this year, the Chinese government has announced plans to help the nation leapfrog Japan to become the largest producer of all-electric and hybrid vehicles in the world. By committing to electric vehicle production, China is also attempting to reduce urban air pollution, carbon emissions and growing dependence on imported oil.
Even as the world faces slowing demand for automobiles, vehicle sales in China and India have jumped last month by 25% and 22% respectively.
Monthly demand for automobiles in the world's two most populous countries had been rising by double-digits in the first half of 2008 as a growing middle-class enjoyed the fruits of a booming global economy. Then the credit crisis hit, and demand slowed. But the governments in the two Asian nations have since rolled out incentives to reverse that trend, helping year-over-year sales.
Currently, China is behind the United States, Japan and other countries when it comes to making gas-powered vehicles, but by skipping the current technology, China hopes to get a jump on the next, according to the New York Times.
The new auto-industry plan, published on the main Web site of China's central government, said China aims to build capacity to manufacture 500,000 "new energy" vehicles, such as all-electric battery cars and plug-in electric hybrid vehicles. The plan aims to increase sales of such new-energy cars to account for about 5% of China's passenger vehicle sales.
The new package, which is supposed to supplement auto-industry stimulus steps announced in January, is designed to keep overall sales in the world's second-biggest car market growing at an average of 10% annually over the next three years, the government said.
Beyond manufacturing, subsidies of up to $8,800 are being offered to taxi fleets and local government agencies in 13 Chinese cities for each hybrid or all-electric vehicle they purchase. The state electricity grid has been ordered to set up electric car charging stations in Beijing, Shanghai and Tianjin.
The 10% growth target is considered ambitious by some analysts, but if China succeeds, it would have auto sales of well over 10 million units this year, and could displace the U.S. as the world's biggest auto market by unit sales, according to the Wall Street Journal.
U.S.-based consulting firm CSM Worldwide forecasts China's overall vehicle sales to grow by 6% to 7% to about 10 million vehicles. Achieving 10% growth in overall vehicles sales this year "will not be so easy" given the slowdown in China's export-led economy, said Yale Zhang, a Shanghai-based senior analyst at CSM.
In comparison with the rest of the world, the Chinese market for automobiles appears to be relatively robust. Monthly auto sales in China surpassed those in the U.S. for the first time in January, but automakers and industry watchers say the news may tell us more about the troubles in the U.S. than about China's growing car market, says a report published in San Francisco Chronicle.
Data released in February by the China Association of Automobile Manufacturers shows 735,000 new cars were sold in China last month, down 14.4 percent from the record of 860,000 set in January 2008. U.S. sales, meanwhile, fell 37 percent to 656,976 vehicles — a 26-year low. Some analysts believe U.S. sales may fall to about 10 million vehicles this year.
The weekend announcement also reiterated Beijing's determination to consolidate the country's fledgling auto sector, which has more than 80 auto makers across the country. The government wants a less-splintered industry with fewer auto companies each generating significantly larger sales volumes.
The Chinese central government wants to consolidate the auto industry through mergers and acquisitions into fewer than 10 groups of manufacturers, down from the current 14, according to the announcement. The announcement said the government would "encourage" FAW Group Corp., Dongfeng Motor Corp., SAIC Motor Corp. and Changan Automobile (Group) Co., among others, to "implement mergers and acquisitions" around the country to form large auto groups.
Like China, Indian auto sales have also seen significant growth in the last few years, but the Indian auto market is much smaller. Tata Motors has recently launched its low-cost Nano minicar to revive growth in the midst of a slowdown by aiming at the motorcycle upgrade market. With a starting price of about $1,945, which doesn't include dealer markup and other charges that consumers will pay, the Nano will be one of the world's cheapest cars.
The automobile industry in India—the tenth largest in the world with an annual output of 2 million units last year—is expected to become one of the major global automotive industries in the future. A number of domestic companies produce automobiles in India and the growing presence of multinational investment, too, has led to an increase in overall growth. Following the economic reforms of 1991 the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and reduced restrictions. The monthly sales of passenger cars in India exceed 100,000 units, according to a related Wikipedia entry.
In Pakistan, Engineering Development Board (EDB) is attempting to increase the GDP contribution of the automotive sector to 5.6%, boost car production capacity to half a million units as well as attract an investment of US$ 3 billion and reach an auto export target of US$ 650 million.
In addition to the growing defense industry, auto industry can become a driving force for the much needed manufacturing industrial base in Pakistan to create significant employment opportunities for its large population. Last year, the auto sector contributed US$ 3.6 billion, only about 2% of the GDP, to the national economy, and employed about 192,000 people.
Pakistan's auto parts manufacturing is a billion US dollars a year industry. Sixty percent of its output goes to the motor cycle industry, 22% is for cars, and the rest is consumed by trucks, buses & tractors.
After a significant growth spurt in 2002-2006, the auto sector is feeling the pain of economic slow-down in Pakistan. The industry is continuing in a slump which began in the previous financial year and according to Business Monitor International's recently published Pakistan Automotives Report, the industry’s performance this year will get worse. In FY08, which ended in June 2008, total vehicle sales fell by 6.2%. The downturn carried over into FY09, with sales for the first half of the year (July to December 2008) down by 48% year-on-year to 52,927 units for cars and light commercial vehicles (LCVs), while compared with November, sales for December were down 55%. These results support BMI’s forecast for a drop in sales of cars and LCVs to around 112,000 units in FY09. BMI expects the total auto market in Pakistan to contract by over 32%, with the worst damage done in the car and bus segments, which is forecast to fall by 45% each. Pakistan’s Economic Co-ordination Committee (ECC) is to consider a tax cut of 10% for domestic car manufacturers, which has been proposed by the Ministry of Industries and Production. However, the plan is not without its opposition, as the Federal Board of Revenue is reportedly against supporting individual sectors as this would prompt other industries to seek help. Moreover, with just five carmakers producing locally, the automotive industry is relatively small. On the other hand, the industry is also largely self-sufficient as the majority of its output is sold within Pakistan; this reduces the country’s reliance on imports and raises issues such as the protection of local jobs and the industry’s contribution to the overall economy.
Among the automakers, Indus Motors and Pakistan Suzuki reported positive earnings: The two leading car assemblers PSMC and INDUS posted positive earnings for 2008. PSMC reported operating losses of Rs 399 million. However, increase in other income by 77 percent offset their losses helping PSMC post positive earnings of Rs 26 million, according to Daily Times. Honda posted a loss after tax of Rs 190 million for the period July-December 2008 after a decline in net sales by 5 percent and a massive surge in operating expenses over the corresponding period last year.
The poor state of the industry is reflected in BMI’s Business Environment Rating for the automotive industry in Asia Pacific, where Pakistan is in last place on a score of 42.4 out of a possible 100. The market is held back by low production growth potential and an average rating for sales growth. However, as a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS) under the auspices of the World Trade Organization (WTO), the country’s regulatory environment scores well. A number of free trade agreements also contribute to this criterion, although forming FTAs with non-Asian countries would improve this rating further. Despite low marks for bureaucracy and corruption, the market does score well for its long-term economic risk and policy continuity.
With just a handful of manufacturers, Pakistan’s competitive landscape remains narrow. Japanese car manufacturers control most of the country’s passenger car production and sales. Figures for FY08 show that Suzuki-brand models represented 62% of total Pakistani passenger car production and 51.7% of sales. Toyota is gaining, however, with Corolla becoming the country’s best-selling model in the first half of FY09.
According to Daily Times, as many as 60,000 workers and staffers in Pakistan's auto sector have lost their jobs from July, 2008 to January, 2009 due to falling demand for cars. More jobs cuts are feared with continuing weakness in demand.
Given strong underlying growth dynamics in South Asia, the negative feedback effects of the global financial crisis are expected to be temporary. A relatively rapid rebound is expected in 2010, with a projected revival of GDP growth to 7.2 per cent. The long term prospects for the auto industry in the continent of Asia appear to be quite favorable. As the current financial crisis ebbs, there will be significant pent-up demand for automobiles in Asia, including India, Pakistan and China, that will drive the growth in auto industry.
Related Links:
Auto Industry Prospects in India, Pakistan and China
Pakistan Automobiles Report 2009
Auto Pakistan Expo 2009
Pakistan Automotive Report
China Surpasses US in Auto Sales
Auto Industry in India
India's Global Shopping Spree
6 comments:
Today's San Jose Mercury News has a quiz that asks the following questions about Tata Nano:
A. Its horsepower is comparable to that of a lawn mover?
B. It is inspired by Ford Model T.
C. It is a relatively safe car.
The paper says the answer to all of these questions is YES.
Today's NY Times reports that vehicle sales in China passed those in the United States in the first quarter, as China has weathered the global downturn much better than other major economies. And there are growing signs that China will become the leading automotive market in the long term.
“The center of gravity is moving eastward,” Dieter Zetsche, the chairman of Daimler, said at the opening day of the Shanghai auto show Monday. “This has, if anything, only accelerated through the crisis.”
China’s emphasis on fuel efficiency is partly a reflection of frugality: income per person in China is still one-sixteenth of American levels. But it is mainly a result of the Chinese government’s strong determination to reduce dependence on imported oil.
Late last year, the government cut to 1 percent its tax on “family vehicles” with fuel-sipping engines no larger than 1.6 liters, while raising the tax to as much as 40 percent on cars, minivans and sport utility vehicles with larger engines.
Click here to read more.
Reko Diq controversy is something that suggests to me that the politicians in Islamabad have botched the handing out of mining licenses at beat and have sold out a huge asset for peanuts at worst for whatever reason. Even in the Pakistan Supreme Court, the discussion is on the copper and gold assets, while the rare earths and rare metals like Samarium, Dysprosium, Neodymium, Niobium etc are not even spoken about. And, the companies that have been granted the mining contract are offering to pay a 2% royalty while the Pakistan government is asking for 5%. I can understand this percentage being offered for copper and for gold which are very expensive to extract even if some of the new reduction methods are used, but since the ores are going to be processed in Chile and Canada, someone is certain to go laughing to the bank at Pakistani citizens' expense. The figures of $ 260 billion worth of copper and gold that are being bandied about are a smokescreen - the rare earths and rare metals available there are almost certainly worth considerably more.
Best wishes and I hope that saner counsel prevails in the Pakistani legal system. If this business is allowed to go ahead - even at the 5% royalty demanded by the government - it will have been a theft of Pakistani national assets.
Although such disruption has yet to come to Pakistan’s auto industry, plenty of auto related services such as classifieds, car brokerage, dealerships and sales are quickly moving online to websites such as Apni Gari, Carmudi, OLX, PakWheels, Sasti Gari and countless others.
Smartphones with internet connectivity are deployed to solve some of the inherent problems related to the conventional auto trade. For example, buying a used car from a dealer meant several visits to find the right car or sifting through hundreds of newspaper classifieds, with limited information and no pictures. With online portals, people can sift through tens of thousands of cars listed for sale across Pakistan, look at pictures and then decide which ones they want to investigate further.
Similarly, sellers faced challenges with the traditional system because they either had to leave their car at the dealer’s for a long period of time or sell it to the dealer instantly at a price lower than the market value. With online services, they can now list their cars and wait until they find a buyer willing to offer the right price.
Plenty of auto related services such as classifieds, car brokerage, dealerships and sales are quickly moving online to websites such as Apni Gari, Carmudi, OLX, PakWheels, Sasti Gari and countless others.
According to World Bank data, there are three million cars on the road in Pakistan today. This number is increasing rapidly as more than 170,000 new cars are sold every year and about 35,000 to 40,000 cars are imported every year as well. Yet these numbers pale in comparison to other developing countries, given that the car ownership per capita in Pakistan is very low.
There is already a trade of about 750,000 used cars taking place every year in Pakistan and more than 50% of this used car inventory has already come online through auto buying/selling portals. Given that trade is moving online, used car dealerships have realised the power of the internet and according to the All Pakistan Motor Dealers Association (APDMA), 4,500 dealerships in Pakistan are putting all of their inventory online on auto sites and other mediums like their own websites, social media, etc.
Not only has the car trade moved online, so has the research part, whereby people decide what to buy. Rather than relying on an auto expert, a relative or a friend, anyone can go online, find out the pros and cons of the different makes and decide what to buy. In a study conducted by Nielsen, Pakistanis spend about three weeks deciding on what their next car will be and the majority of this time is spent online thanks to the abundance of information.
Services such as car financing and maintenance have also moved online. With over 10 banks offering car financing, the internet is an excellent means for people to compare rates and terms and conditions. In terms of maintenance, services such as AutoGenie allow people to book an appointment with an experienced mechanic who will come to their home and make the necessary repairs. Similarly, Insta Lube, a service launched by Total this April, enables people to call a helpline to have their automobile’s oil changed at their home.
While all the above feels like disruption in the traditional way of doing things, in my view we are only just getting started in Pakistan and all the businesses that are disrupting today will be disrupted in turn unless they innovate. In more mature markets like the US, used car sales are even more disrupted and are almost like buying diapers on Amazon.
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So imagine being driven around in driverless cars owned by Uber! Disrupt or be disrupted!
http://aurora.dawn.com/news/1141310
China plans electric cars in Pakistan
https://nation.com.pk/28-May-2018/china-plans-electric-cars-in-pakistan
HEFEI - JAC Motor, a Chinese state-owned automobile and commercial manufacturer based in Anhui province, is planning to introduce electric vehicles particular cars, its Deputy Chief Economic Manager David Zhang said.
Talking to APP, he said, “We are planning to introduce new energy vehicles particularly electric cars in the Pakistani market under a long term development programme in the future.”
Expressing confidence into the current economic situation in Pakistan, he said Pakistan’s economy is now gearing up and there is more improvement in development of infrastructure. He said the management of the company is thinking and aiming at the opportunity to expand its production line in Pakistan.
He pointed out that the cost of the electric cars has also decreased a lot and it has become an economically viable for the middle class, adding, “With more improvement in the economy and fundamental structure ready, we will have an opportunity to take our electric car into Pakistani market.” David Zhang informed that his company is already exporting its products especially the light and mini trucks to Pakistan and it has also set up a factory to manufacture these trucks locally.
“The performance of our products in the local market has been very good and we will expand our lines of production from medium to heavy duty trucks in near future,” he added.
He said both China and Pakistan have friendly relations and are also strategic partners and the businessmen of the two countries have a very good potential to work together. He opined that the Chinese investors could take advantage of good potential and incentives offered by government of Pakistan under the China Pakistan Economic Corridor, a flagship project of Belt and Road Initiative.
About the sales outside China, he said his company began the export of vehicles in 1990 to Bolivia and its products have subsequently been sold in over a hundred countries, adding light trucks are a popular exported product.
Some JAC exports are in the form of knock-down kits, which are assembled at overseas factories in countries including Egypt, Ethiopia, Vietnam, Mexico and Iran.
MoUs, agreements galore for assembling electric cars in Pakistan
https://profit.pakistantoday.com.pk/2018/06/11/mous-agreements-galore-for-assembling-electric-cars-in-pakistan/
KARACHI: Rahmat Group has signed at least 14 memorandum of understanding (MoU) and technical collaboration agreements last month with different Chinese companies to establish Electrical Complex at Nooriabad.
This complex has been planned to establish assembly-cum-progressive manufacturing plants for electric/ battery operated vehicles under joint venture and technical collaboration agreements with the Chinese manufacturers. Roll out will begin with electric buses. Eventually, the group plans an entry into electric two-wheelers as well. Plants with two well-known companies of China would be set up at the complex, reports a national daily.
Rahmat Group’s chief operating officer Shaukat Qureishi said on Saturday that the group has already acquired 25 acres of land at Nooriabad. The group is filing the application and proposals with the Board of Investment and ministry of Industries after the Eid, based on all the joint venture agreements signed by respective manufacturers from China.
As soon as the approval is granted, a crash plan has been made to come up with the models within 4-6 months, while the production lines will be set up on a fast track, said Qureshi.
“All arrangements have been firmed up with the partners concerning plants, machinery, and equipment,” he said, adding immediate production would be under SKD followed by CKD as per the localisation program of Auto Policy 2016-2021. However, for introduction, immediate imports of the desired units would be conducted within the 3-4 months.
A MoU has been signed with two different Chinese companies for the local production of electric cars (small cars) with different capacities while another memorandum has been signed with another Chinese firm to assemble electric vans/pickup/loaders.
The group also plans to make electric lithium-based high-tech batteries with two famous Chinese companies for use in buses and cars as well as motorcycles on options.
Giving some examples, Shaukat said some the of MoUs and technical collaboration agreements signed with Chinese companies are Shangdong Leiteng Electric Power Technology Co, Jiangzi Technical Vehicles Manufacturing Co Ltd, Jiangsu Fuan Technologies, Louyang Xinguang Lithium Science and Technology Co Ltd, Zhehang Shangi Tianying Vehicle Industries, Yangzhou Daojue New Energy Development Co Ltd, Haohong Motors, Weifang Shandong Electric Power Technology Co Ltd, Shanghai Shenlong Bus Co Ltd, Wuxi Shengbao Electric Vehicle Co Ltd and Base Ningbo Foreign Trade Co Ltd.
The government has recently relaxed duties of electric vehicles in the last budget which is not enough. In order to save foreign exchange from purchase of fuel, a crash programme ought to be launched by the government to promote e-vehicles, with zero customs duty and sales tax.
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