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LETTER OF TRANSMITTAL

June 03, 2008

Mr Shahid Hameed

Teacher, Analysis of Pakistani Industry

IoBM
Karachi.

Sir:

We herewith present our “Term Report” authorized by you as a requirement for this course. In this report, we have tried to provide updated information and SWOT analysis of Automobile Industry.

We hope we have covered all that was required for the report.

If there be any clarification demanded, we would appreciate a call from you to our group members.

Sincerely,

OVERVIEW

Auto market is one of the largest segments in world trade. Changing models, improving fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto industry in a fast globalizing world.

The first phase of automotive assembling in Pakistan started in 1950 with Bed Ford truck followed by Ford Prefect, Ford Cortina and Dodge Dart. The indigenized parts in these vehicles did not exceed 20% with only exception of Bed Ford trucks with a deletion level of 80%. By the end of 70s practically all automobile assembling in Pakistan ceased.

The 2nd phase of Automobile assembly started in 1983 with the introduction of FX 800 CC Suzuki Car. In 1989 Pak. Suzuki changed the Model of FX 800 CC with Mehran 800CC. Pak Suzuki thereafter in 1992 introduced Khyber 1000 CC and 1300 CC Margalla but the indigenization levels from 1983 to 1995 were not significant (i.e. Mehran 30%, Khyber 20%, and Margalla, 15%).

In 1993, Indus Motors Company Ltd., Karachi introduced Toyota Corolla. Honda Atlas cars (Pak) Ltd Lahore in 1994 introduced Honda Civic having 1300CC engine capacity. Indus Motors, Dewan Farooq Motors and Pak Suzuki introduced smaller Cars i.e. Cuore, Cultus and Santro of engine capacities 850 cc, 1000 cc respectively in 2000.

This was known as era of competitiveness. Up to 1995, the deletion cell of MOI&P was formulating and monitoring the deletion programs. The industry specific deletion programs were formulated to specify local content requirements for cars, motorcycles, Buses and Trucks Tractors etc.

The deletion policy finalized in 1996 has the following features:

* Industry Specific Deletion program.
* No roll back from achieved Deletion Levels.
* Even handled Tariff Protection at all levels of processing.

The deletion levels were finalized by the sub-committees for cars, LCVs, Motorcycles and tractors etc., constituted by indigenization committee of EDB on the basis of technology levels prevalent in the engineering industry of Pakistan. The Industry specific deletion program (ISDP) books were published and distributed amongst the stakeholders, which resulted in a significant improvement in indigenization.

Major Policies after year 2005:

1. Tariff Based Systems (TBS)
2. Auto Industry Development Program (AIDP).

July 1st 2006, the deletion programs for the Automotive Sector have been replaced by the Tariff Based System (TBS). The deletion programs have gradually been phased out under the WTO regime to become TRIMs compliant. The TBS is the outcome of a long drawn consultative dialogue between all stakeholders including OEMs and Vendors, belonging to different sub-sectors of the Automobile Industry.  

The TBS has been developed with the following overriding objectives:  
* Preservation & promotion of technologies that have been developed in the country * Protection to the present job structure in the auto sector. * Promote job creation
* Protect the existing & planned investment by the OEMs & Vendors * Promote new investment
* Expand the consumer base to create economies of scale
 
The basic framework of Tariff Based System is as under:
 
1. Imports in CKD condition would be allowed only to assemblers having adequate assembly facilities and registered as such by the concerned Federal Government Agency. 2. Parts/ components...
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