Pakistan has a long history of close relations with China. The relations have been cemented rock solid with the passage of time, especially with the start of China-Pakistan Economic Corridor (CPEC).
Pakistan has a long history of close relations with China. The relations have been cemented rock solid with the passage of time, especially with the start of China-Pakistan Economic Corridor (CPEC).
The Pakistan’s friendship with China is usually boasted as higher than mountains and deeper than oceans and it has been proved as such in the 70 years of historical relations. One of the big push boosting our relations, besides CPEC, has been trade pact with China popularly called as Pak-China Free Trade Agreement (FTA), which has gained a high importance in our trade relations, as Pakistan has free access to Chinese market and vice versa true for China. Now, it’s in the 2nd phase of its implementation.
Pakistan is a fifth largest country of the world providing a big opportunity to investors to invest in various sectors of economy, especially in automobile industry. The China is a new rising world power historically maintaining best of the relations with Pakistan. We are already embedded in close economic cooperation in the form of China-Pakistan Economic Corridor (CPEC).
We have had signed FTA with China, which is extremely beneficial for both of the countries in promoting free trade and investment. Looking at this background of the relations, Pakistan and China have started new cooperation in the field of automobile manufacturing, which is in fact, a win-win situation for both of the countries. China has gained a huge importance in automotive manufacturing having the largest automobile market in the world.
Pakistan is a fifth largest country of the world providing a big opportunity to investors to invest in various sectors of economy, especially in automobile industry. The China is a new rising world power historically maintaining best of the relations with Pakistan.
Automobile sector is all the way very important and integral part of highways, motorways and road communication networks. Cooperation in the automotive sector is in benefit of both countries. The CPEC has provided a great opportunity of importing automobile parts and ckd kits from China on affordable prices. Pakistan has an abundant cheap labour and Chinese Original Equipment Manufacturers (OEM) in this sector can establish its own plants in Pakistan benefitting out of this low cost factor of production in the form of cheap labour.
Pakistan has already given tax concessions to Chinese investors on long term basis, so the Chinese automotive manufacturers can avail tax concessions in this field, which is again a great incentive for establishing auto industry in Pakistan. The flourishing Gwadar free zone is main attraction for such investors from China. The JAC, Zotye, FAW, Dongfeng and Foton auto manufacturers are already showing interest for investment in Pakistan.
The Chinese automobile market is so big that it consists of more than 30 percent of worldwide vehicle production exceeding that of European Union or that of the United States and Japan cumulatively. The automotive sale volume is now touching about 30 million units in China including but not limited to multi-purpose and sport-utility vehicles.
The traditional four brands of car manufacturers are FAW Group, Dongfeng, SAIC Motors and Chang’an. Other than these four most famous auto manufacturers are Beijing automotive group, Guangzhou Automobile group, Geely, Brilliance automotive, Great Wall motors and Jianghuai (JAC Motors).
The most prominent and popular features of vehicles by MCM are eye-catching designs, luxury facilities being comparatively cheaper than most of the high cost and unaffordable current car market prices making it attractive for clients.
As the auto industry is fully cognizant of the all-important electric vehicles benefits, hence it would be a great leap forward for the industry itself. The future lies with electric vehicles replacing fossil-fuel motors.
It is encouraging to see Brilliance autos from China showing interest to set up their assembly plant in Pakistan. The German famous automaker BMW already in joint investment with Chinese investors as mainland partner, now established in Chinese market, are also contemplating expression of interest in Pakistani market.
The First Automobile Works i.e FAW and Foton Group of China have their assembly plants in Karachi and they are interested to invest more as their heavy automobile trucks and buses are already plying regularly and popularly on our roads. The commercial trucks and pickups are very popular in the market now-a-days having Chinese brands manufacturing tags. It is a great success story for Chinese companies investing in automobile sector of Pakistan.
Pakistan has always been interested to attract Foreign Direct Investment (FDI) in various sectors of economy. And automobile industry is first among the equals. The Master Group of Pakistan has entered into the joint venture of car manufacturing in Pakistan with Chinese Changan carmaker in 2017. The Pakistan’s Master Group and China’s Changan Motors entered into partnership with 70:30 equity as joint-venture with mix production of cars and pick-ups both at the same time.
They have got a foothold in Pakistan with the name and brand of Master Changan Motors (MCM) and have started assembling right-hand-drive vehicles with a big leap forward in the market. The sale volume has been very high even during the Covid-19 pandemic, which is a great sign of flourishing market. The people of Pakistan are relying more on Chinese cars and vehicles being cheap and affordable. So the future of MCM is also very bright.
The MCM is planning to provide and export Complete Knock-Down (CKD) kits to regional countries, as the Group has invested to establish a $136 million CKD plant for this purpose. With MCM, we see a great future of Pak-China joint venture in automotive industry, hopefully growing strong with the passage of time.
The Changan-Pakistan joint venture will add value to our industry once it establishes plant production for EVs and become exporters of cars and pick-ups for our potential market of neighbouring countries.
It is of great significance to note that it was the first green-field project launched under the 2016/21 Auto Industry Development Policy covered under China-Pakistan Economic Corridor 2.0. The Changan Motors is the first and so far only carmaker company from China having equity with a Pakistani company as a Joint Venture. The countries like Bangladesh and Sri Lanka can possibly be the best of our right-hand-drive potential markets for MCM vehicles.
We see that different Chinese companies chose different countries for their automobile cooperation, as DFSK went to Indonesia and Proton Motors were purchased by Chinese investors and established to have had their joint ventures with Malaysia. The Changan motors came to Pakistan for their business growth, which is definitely a right choice owing to rising demand of automobiles in Pakistan.
The most prominent and popular features of vehicles by MCM are eye-catching designs, luxury facilities being comparatively cheaper than most of the high cost and unaffordable current car market prices making it attractive for clients. The annual production capacity of the plant is 30, 000 units having around 32 dealerships all over Pakistan. The Group has an impressive sale of around 3000 units last year, which is going to gain strength with the passage of time. It is expected that it’s going to capture most of the market in the country, especially its pickups are very popular in KP being cheap and efficient. The booking of cars and pickups both have picked up speed, as demand for dealership is also on the rise. The future seems to be promising for more joint venture in this sector.
The most important question is to see whether Pakistan can become a hub of auto exports in near or distant future. It actually all depends upon automotive joint cooperation and ventures with the support and investment of Chinese auto moguls. The chances are bright for such joint ventures, as the world’s future in automobile industry lies with China. We all know that Electric Vehicles (EVs) are going to replace fossil-fuel vehicles and China is one of the biggest manufacturers of batteries.
This is one of the reasons that future market players in this industry are right now establishing their EV manufacturing plants in China. If our joint ventures flourish in the upcoming EV industrial revolution, Pakistan can become an export hub in this enterprise, which is a dream that can come true subject to right economic policies in place. The MCM group has already put a huge invested in CKD plant in Pakistan to export CKD kits to neighbouring countries in the region. Pakistan can get full advantage of this joint venture cooperation from China.
After the EV Policy, the Changan Motors are planning to establish production plant manufacturing EVs in Pakistan, which would be a big boost to the flourishing automotive industry. As the auto industry is fully cognizant of the all-important electric vehicles benefits, hence it would be a great leap forward for the industry itself. The future lies with electric vehicles replacing fossil-fuel motors. The Changan-Pakistan joint venture will add value to our industry once it establishes plant production for EVs and become exporters of cars and pick-ups for our potential market of neighbouring countries.
Pakistan is a choice country for Chinese investors after CPEC investment by China, as almost $75 billion project can yield wonderful results. The ever rising demand of automobiles in Pakistan providing edge to the investors from China to invest more into this industry to get maximum benefit of the existing potential. The Chinese are already contemplating for industrial layout in place of product sales in Pakistan to establish spare parts industrial clusters with such an abundant labour.
Pakistan is a choice country for Chinese investors after CPEC investment by China, as almost $75 billion project can yield wonderful results. The ever rising demand of automobiles in Pakistan providing edge to the investors from China to invest more into this industry to get maximum benefit of the existing potential.
Pakistan can become a window for Chinese auto investors to promote and export products from Pakistan to the rest of the world. Actually, auto industrial clusters are significant indicator for economic growth of any country. The industrial chain involves a lot of other industrial outputs starting from raw materials of steel, rubber, oil etc to full-fledged processing and manufacturing machinery for the final output. While the upstream of this industrial chain involves the ante stated mechanics, the downstream revolves around market, retail and consumer finance.
The Chinese automobile cooperation with Pakistan will go a long way in the auto industrial clusters creation supporting economy. The automotive manufacturers can provide a required big boost to industrial revolution in Pakistan. The Chinese investment in this regard would help boost establishing a matching industry of spare parts with transfer of technology. Once the industry is grown up, the logistic cost could be reduced step by step.
There is already a big development to set up China-Pakistan Commodity Trading Centre in Hainan and China-Pakistan Bonded Processing Park in Urumqi Free Trade Zone to bolster trade. A step by step strategy would ultimately involve CPEC for auto industry promotion with the passage of time. A huge cooperation with big investment in auto manufacturing is expected from China on the style and pattern of MCM joint venture, which would definitely provide a big boost to our economic strength as a way forward for economic growth and industrial development.
Writer is Islamabad based senior civil servant, posted as DG NCHD
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