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SWOT ANALYSIS Strengths: Increasing Demand for Cars: In Pakistan context there are 9 cars in 1,000 persons which

is one of the lowest in the emerging economies which itself speaks of high potential of growth in the auto sector and more so in the car production. Rising per capita income with changing demographic distribution and an anticipated influx of 30 to 40 million young people in the economically active workforce in the next few years provides a stimulus to the industry to expand and grow. Resale of Local Assembled Cars: Resale of locally assembled cars is better due to availability of spare parts and after sales services and warranty Used imported cars have been selling below their cost at the showrooms for the last six months but consumers are not inclined to buy because of their low re-sale value and problems in parts availability. Quality of local cars Initially when the import of cars was liberalized the quality of local assembled cars was unsatisfactory so the people of high income level group started buying imported cars and the sales of the local assembled cars started decreasing so the local assemblers started enhancing the quality of their vehicles so we can say that the quality of local cars is becoming the strength of the auto industry. OEM: The local OEM of Pakistan is well equipped with enough advance technology and skilled labor to produce parts according to the desired quality of any foreign company. CNG kit The advantage of buying local assembled cars is that they comes with factory fitted CNG kits at the times when the prices of fuel rising at higher pace internationally. Mechanics: For local assembled cars mechanics are readily available in market and much cheaper so the buyer has not to worry about any problem that can occur in the car in long term whereas the availability for imported cars is a bigger issue for the owners and if somehow they are able to find one then the mechanics charges much higher than actually it should be charged.

Weakness: WTO and LCR: In the beginning of 2008, government of Pakistan requested the world trade organization (WTO) to allow it to extend the deletion program. The deletion program also known as the local content requirement (LCR) program made it compulsory for the automobile industry to use locally manufactured parts. The program was an anomaly to the WTO goal to liberalize world trade. The local parts manufacturers have suffered heavily as a result of this decision. Rising costs: Inflation is another important factor that has caused irredeemable damage to Pakistans auto industry. Due to high inflation, the input prices have increased rapidly over the last two years making it impossible for auto manufacturers to produce low cost vehicles. Moreover, the energy crisis has made things even worse for the automobile industry. The shortage of power has forced them to shift towards expensive self generation which has increased the costs even further. Lack of skilled manpower: Traditional machines are no longer able to produce automotives that meet the quality and precision requirements of the twenty first century. To manufacture vehicles that are up to international standards industry needs to acquire modern machines but it lacks skilled labor that could properly utilize the modern machines. In order to solve this issue, Government should help the industry in setting up labor training programs.

Opportunities: Importing technologies: Pakistani automobile manufacturers can raise the quality of their products by importing German machines that are modernized and up to date with the world standards. Moreover, local auto makers could initiate joint ventures with their foreign counterparts. This will enable them to produce world class automobiles at reasonable prices. Foreign Investment: A lot of multi nationals have shown interest to invest in Pakistans automobile sector. Recently, China National Heavy Duty Truck Corporation (CNHDTC), one of the largest heavy duty truck manufacturers in China, is negotiating a partnership with one of the local truck manufacturers to invest in auto industry. Similar partnerships can also be developed with auto manufacturers from other countries like Germany and U.S.

Alternative Fuel: Due to rising fuel prices around the world, affording automobiles have become increasingly difficult. As a result, numerous countries have started switching towards alternative sources of fuel such as ethanol (obtained as a byproduct from molasses). In Brazil around 60% of the automobiles are powered by ethanol. Although, Pakistan is among the largest producers of molasses but sadly we have not been to take advantage of this fact. If auto industry could produce engines that are compatible with ethanol they would make automobile affordable for wider range of people. This would increase the demand of automobiles and hence, auto manufacturers will earn higher profits.

Global spare part market The annual gross sales turnover of the auto industry, at present, stands at Rs210 billion while export of auto parts are estimated at $35 million. As such, the increase in production turnover is projected to increase by 185 per cent while the exports of auto parts would make quantum jump. Threats: WTOParts indigenization Smuggling of auto parts: The auto industry is generally faced by multiplicity of taxes; the presumptive tax regime has led to increase in prices of imported inputs and the finished goods. Component manufacturers are struggling to compete with under-invoicing, miss declaration and smuggling. Import of used parts is still continuing at a large scale. Smuggling, underinvoicing and dumping of auto parts Competition from import cars: Pakistans auto industry is still immature; if the government decides to abolish duty on imported cars then auto industry is going to face serious competition from the international car manufacturers. Let alone abolishment, even a slight reduction in the import duty would dent the industry badly and could pose a serious threat to it. Varying Fuel prices: As the oil prices have increased vigorously over the last couple of years. This has led to a decrease in the demand of automobiles. Moreover, the oil prices are expected to vary even more in the future, which will alter the demand of automobiles and cause a threat to the industry.

Decreasing tariff structure: For localized parts of CKD cars, the tariff would reduce from 50 per cent to 45 per cent in 2008-09 and further to 35 per cent in the next two years. The tariff for CKD nonlocalized parts would be reduced from 35 per cent to 32.5 per cent in 2007-08 and would keep on decline by 2.5 per cent every year to 25 per cent in 2010-11. The rate for CBU cars up to 1500cc, the tariff would be reduced from 50 per cent to zero next year (2007-08) and to be kept at that level thereafter. For CBU cars between 15001800cc, the current rate of 65 per cent would be reduced at the rate of five per cent annually to 50 per cent by 2010-11. For CBU cars exceeding 1800cc, the applicable rate of 75 per cent would be reduced at the rate of five per cent per annum to 50 per cent in 2010-11. For LCVs, the tariff on CKD kits would be reduced from 20 per cent to 15 per cent at the rate of one per cent every year. However, the tariff for CBU LCVs, the rate would be reduced from 60 per cent to 50 per cent in a phased manner by 2010-11. For two-wheelers, the tariff on CKD kits would be reduced from existing 30 per cent to 20 per cent in phased manner to 2010-1. Similarly, the tariff on CBU two wheelers would reduce to 60 per cent by 2010-11 from existing rate of 90 per cent. For localised CKD parts of tractors and heavy commercial vehicles, the existing tariff of 35 per cent has been proposed to be reduced to 25 per cent in 2010-11. For prime movers (up to 280 HP) the tariff for CKD would be reduced from 10 per cent to five per cent next year and then kept at that level onwards. Similarly, the tariff for CBUs would be reduced to 25 per cent next year and then kept at that level for the next five years. The tariff for prime movers (above 280HP) and would remain unchanged, while it would be reduced for trucks from 10 to five per cent and from 30 to 25 per cent next year.