Effectiveness of Automobile Policy for Indigenization in Pakistan

The current study discusses the automotive sector indigenization in the cars segment and achievements of the five-year Automotive Development Policy ADP 2016-21 announced by Economic Coordination Committee (ECC) of Pakistan’s Government on March 18, 2016 for a period of five years effective from July 1, 2016, to 2021. The important argument of this paper is to find out the ADP 2016-21 critical aspects and its impact on the existing automobile industry for the indigenization of vehicles (cars) in Pakistan. One of the main objectives of ADP is to help in bringing new players in the market along with increasing the existing level of localization with reverse engineering, modification, and also new parts development, to catch the attention of existing original equipment manufacturers (OEM’s) or assemblers, technological improvement, and satisfy all stakeholders through enabling environment and growth strategy, consumer welfare, and eliminate Complete Knock Down (CKD) imports by existing car manufacturers. The Automobile sector of Pakistan comprises assembly/manufacturing units for the production of Cars, Tractors, Truck/Buses, Jeeps, Light Commercial Vehicles (LCVs)/Pickups/Vans and Two/Three Wheelers, whereas the downstream vending industry comprises around 2000 part manufacturers out of which around 400 are registered vendors. In term of performance, there are three Japanese companies essentially dominate the passenger car segment in Pakistan. Having looked at the prevailing situation of the automotive sector in the local development of car components and the capability of the automotive sector after the implementation of the ADP, 2016-21 is the important rationale of this paper. It is to analyze whether this automotive policy document may have an influence on the indigenization of the cars that have been imported in CKD condition and assembled in Pakistan. This study results reveal that the policies with respect to automotive development must be long-term in order to decline CKD imports even after the existing ADP 2016-21, it may be because of the problems being faced by existing car producers. However, exploring the Thailand industry development model is of high importance for Human Resource Development (HRD), technology transfer, product design, and capability enhancement. The effectiveness of several automotive policies announced by the governments for the development of locally manufactured vehicles, numerous studies have been conducted. Accordingly, this research study would definitely be useful to provide a support for the relevant policies for indigenization of cars and future interrelated expansion activities such as design, development, and research.