The government has a responsibility to buttress the transition in the dynamics of the automotive industry.
Overpriced, substandard vehicles have been the essence of Pakistan’s oligopolistic automobile industry. The seasoned auto trio – Atlas Honda, Indus Motors, and Pak Suzuki Motors – savoured overwhelming market dominance over the years in the wake of feeble local competition. The limping sector never bothered the authorities much, which manifested in a lack of stimulus to incentivise the new-entrants to the industry. Consequently, the citizens unwillingly got along with inferior, watered-down cars.
The industry continued to blossom on false grounds for a prolonged time. The car assemblers never felt the need to get equipped with state of the art technology. Besides, the safety requirements were disregarded by these motor companies owing to a lack of competitive pressure. Despite an imported alternative, most consumers preferred these local cars because of expected ease in their maintenance.
However, the ingress of new entrants of late has changed the fate of the industry. Under the Greenfield Investment category of automotive industry Development Policy (2016-2021), Hyundai Nishat Motors, Kia-Lucky Motors Pakistan Limited and United Motors Private Limited set up assembly-cum-manufacturing units in Pakistan. It became imperative for them to focus on globally popular models, cost minimisation, fuel efficiency, and user comfort enhancement to remodel the market fundamentals. And they did not disappoint.
Kia-Lucky Motors laid the foundations of disruption by launching their SUV, Sportage, a year ago in August 2019. They spotted a niche in the modestly priced, compact SUVs which the consumers whole-heartedly welcomed. The success of Sportage paved the way for the introduction of the Hyundai Tucson recently. With a promising launch that saw bookings filled to the brim, Tucson – like Sportage – is anticipated to fare well.
The people’s propitious response to this new concept is primarily based on the feel of being elevated. The sedan category users – Civic, Corolla, and City – can now relish an SUV comfort at the same price. Although the new Toyota Yaris is effectuating the performance plans, there has been an evident shift away from the Sedan category to the new SUVs, which has dented the old guns heavily. What becomes more taxing for the senior players is the fact that Hyundai plans to launch two sedan models before June next year. Elantra, one of those two, will compete against Corolla and Civic while Sonata – a high-end sedan – will challenge Camry and Accord’s legacy.
With Kia Picanto still battling to find its feet against similar Suzuki models, the company is contemplating Sorento’s launch at the year-end. Sorento is expected to compete against Toyota SUV, Fortuner, with a discounted price and better specifications like a panoramic sunroof. The Lucky group is also mulling upon the launch of a model below Sportage to grab further the Sedan-to-SUV market share of Civic, City, and Corolla. Both Kia and Hyundai may look to proffer as many new compatible Sedans and SUVs by June 2021 to yield maximum benefit out of the automotive industry Development Policy (2016-2021).
The traditional Japanese auto assemblers exhibited a conservative mind set by remaining content in the Sedan market. But Kia-Lucky Motors dared to transform the traditionally prevailing norms of the automobile sector. It is the only market participant to absorb the currency shock when other players augmented their prices twice since its launch. Even Hyundai didn’t wait a day for a considerable price hike as the demand of Tucson spiralled. This may give Kia an edge over the others.
They can incentivise the sector by imposing meaningful duties on imported vehicles if the local players embrace an economical pricing strategy. But one thing is for sure, this change is here to stay. With the progress of time, other new companies will gate-crash the industry resulting in cut-throat competition for market share. This will see a positive trickle-down effect on vehicle prices.
This news was originally published at tribune.com.pk