Japanese dominance in Pakistan car market under threat

Posted on 11 Aug 2015 by Cobey Bartels

Economic improvement in Pakistan has attracted both European and Korean auto-makers who are keen to make inroads into the country’s Japanese-dominated car market.

Pakistan’s medium-sized economy has reached its strongest point since 2008, with increased investor confidence and easing inflation prompting consumer spending and an elevated demand for new cars.

The demand for new cars can also be attributed in part to more leasing and financing facilities than ever before, as the country’s automotive industry continues to develop.

The 200m strong South Asian country favours new car ownership and despite locally-based Japanese automaker assembly plants, customers can wait four months or more for new vehicles.

Since the 1960’s, Japanese automakers like Toyota, Suzuki and Honda have gained a strong foothold in the Pakistan car market, offering efficient, low-cost models, despite heavy import taxation.

Before Japanese manufacturers gained the monopoly in Pakistan, US and European cars were commonplace. Fuel prices in the 1960’s prompted the introduction of Japanese manufacturers who have remained the primary option for customers since.

Volkswagen Hood Badge
Germany’s Volkswagen Group is aiming to benefit from the new car shortage.

Germany’s Volkswagen Group is aiming to benefit from the new car shortage, with Pakistani officials and German diplomats announcing visits from the European automaker.

Christoph Adomat, Volkswagen company spokesman, spoke to AFP and didn’t confirm commitment from Volkswagen, but made it clear that Volkswagen remains on the lookout.

“Volkswagen is constantly evaluating market opportunities on a worldwide basis.

“There are no decisions for an investment from Volkswagen side in Pakistan,” Adomat told AFP.

According to AFP reports, Miftah Ismal, chairman of the Pakistan Board of Investment said Volkswagen isn’t the only car company showing interest in the Pakistan car market.

“There are a number of other companies from (South) Korea and Europe that we are talking to who are thinking of setting up assembly plants in Pakistan,” Ismal told AFP.

Pakistan’s steep import car duties for vehicles less than three years old have prompted Japanese automakers to set up local assembly plants and price cars above the average for that region, when compared to countries like India who pay significantly less.

The move from European and Korean automakers suggests a shift in Pakistan’s automotive industry and offers hope of more vehicle model options for consumers.