2 wheeler industry

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FINAL PROJECT

A STUDY ON THE FACTORS LEADING TO THE

PURCHASE OF MOTORBIKES

Preston University,North Nazimabad Compus, Karachi.

Research and Compiled By:

Rizwan Aziz

2411106014

Submitted To:

Mr. Khalid Pahore

Date: 30th June 2009


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DECLARATION

I hereby declare that this project titled A study on the factors leading to the purchase of

motorbikes submitted by me to Preston University, in partial fulfillment of requirements of

BBA program is a bonafide work carried by me under the guidance of Mr. Khalid Pahore.

This has not been submitted earlier to any other University or Institution for the award of any

degree diploma/ certificate or published any time before.

Place: Karachi, Pakistan Mr. Khalid

Pahore

Date:


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CERTIFICATE FROM GUIDE & HEAD OF THE

INSTITUTION

Certified that this project entitled A study on the factors leading to the purchase of

motorbikes submitted in partial fulfillment for BBA Degree of Preston University was

carried out by Mr. Zubair Naikzad under the guidance of Mr. Khalid Pahore. This has

not been submitted to any other university or institution for the award of any degree/

diploma/ certificate.

GUIDE SENIOR

PROGRAMME DIRECTOR


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DEDICATION

I dedicate my project to my beloved mother and father who both supports and

encourages me at every stage of my life and especially in this project and also my

teachers and my friend Zubair Naikzad for their guidance and moral support in

completion of this project.

God Bless All of Them


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ACKNOWLEDGEMENT

By grace of AL-Mighty Allah, I have completed my Final Project of BBA. I

would like to thank my teachers in Preston University who gave us lots of help

and suggestions. Special thanks to Sir Khalid Pahore for helping us a lot and

providing valuable suggestions, guidelines and moral support.

I would also like to thanks Professor Mr. Sibaty Amir, who guide me too much in

my project.

I also like to thank my friend Zubair Naikzad who helps me a lot whenever I

needed especially in gathering the information.


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Table of ContentsPreface........................................................................................................................................ 8CHAPTER 1 INTRODUCTION ............................................................................................... 9

1.1 GENERAL INTRODUCTION TO THE STUDY ........................................................ 101.2 THEORETICAL BACKGROUND OF STUDY .......................................................... 101.2.1. Market .................................................................................................................... 101.2.2. Marketing ............................................................................................................... 111.2.3. Marketing Management ......................................................................................... 111.2.4. Marketing Mix ....................................................................................................... 121.2.5. Marketing Planning ................................................................................................ 121.2.6. Marketing Research ............................................................................................... 131.2.7 Need of marketing research .................................................................................... 131.2.8 Consumer ................................................................................................................ 131.2.9 Perception ............................................................................................................... 131.2.10 Attitude ................................................................................................................. 131.2.11 Brand ..................................................................................................................... 141.2.12. Consumer Behavior ............................................................................................. 141.2.13 Model of consumer behavior ................................................................................ 141.2.14. Major Factors Influencing Consumer Behavior .................................................. 14

CHAPTER 2 RESEARCH DESIGN ....................................................................................... 172.1 Introduction .................................................................................................................... 182.2 Review of Literature ...................................................................................................... 182.3 Purpose of Literature Review ........................................................................................ 182.4 Statement of the Problem ............................................................................................... 192.5 Need of the study ........................................................................................................... 192.6 Objectives of the Study .................................................................................................. 192.6 Methodology .................................................................................................................. 192.7 Sources of Data .............................................................................................................. 202.8 Scope of the study:- ....................................................................................................... 212.9 Limitations of the study:- ............................................................................................... 212.10 CHAPTERIZATION ................................................................................................... 21

CHAPTER 3 PROFILE OF THE INDUSTRY ....................................................................... 223.1 ANALYSIS OF PAKISTANI INDUSTRY .................................................................. 233.2 Major Policies after year 2005 ....................................................................................... 243.3 Problems Faced By the Automobile Industry ................................................................ 273.4 Current Investment, Contribution to GDP and Revenue to GOP: Error! Bookmark notdefined.3.5 Present situation of motorbike industry: ........................ Error! Bookmark not defined.

CHAPTER 4 ANALYSIS OF DATA COLLECTED .............Error! Bookmark not defined.4.1 Age of the Respondents ................................................. Error! Bookmark not defined.4.2 Occupation of the Respondents (Testing Hypothesis 4) Error! Bookmark not defined.4.3 What is your monthly Income? (Testing Hypothesis 4) Error! Bookmark not defined.4.4 Which Bike do you have? ..............................................Error! Bookmark not defined.4.5 How did you come to know about this motorbike? (Testing Hypothesis 3) ..........Error!Bookmark not defined.
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4.6 Does Advertisement Influence your decision in choosing a motorbike? (Testing Hypothesis 3) .................................................................. Error! Bookmark not defined.4.7 Do you have full knowledge about motorbike before buying? (Testing Hypothesis 3)..............................................................................................Error! Bookmark not defined.4.8 If new motorbike with good features comes in, then would you like to change your

..motorbike? (Testing Hypothesis 3) ................................Error! Bookmark not defined.4.9 For how long do you own a motorbike? (Testing Hypothesis 2) . Error! Bookmark notdefined.4.10 For what purpose do you use your Motor Bike? (Testing Hypothesis 4) .............Error!Bookmark not defined.4.11 What is your opinion on the performance of your own motorbike? (Testing.///Hypothesis 2) ...............................................................Error! Bookmark not defined.4.12 Rank the factors which have influenced you purchase of motorbike? (5- Mostinfluenced, Rank 1- Least influenced) (Testing Hypothesis 2) ..Error! Bookmark notdefined.4.13 How is the availability of spare parts of your motorbike? (Testing Hypothesis 4)

..............................................................................................Error! Bookmark not defined.4.14 Which factor below influenced your decision? (Testing Hypothesis 1) ...............Error!Bookmark not defined.4.15 How would you rate the following factors of bikes when you purchased the motorbike? (5 for Highest, 1 for lowest). (Testing Hypothesis 1) .... Error! Bookmarknot defined.4.16 Are you required to have description from sale representative about features ofdifferent models when you purchase a motorbike? (Testing Hypothesis 3) .........Error!Bookmark not defined.4.17 Did you go for the test drive? (Testing Hypothesis 1) . Error! Bookmark not defined.4.18 Are you satisfied with the post sales services provided by your motorbike company?(Testing Hypothesis 1) ................................................. Error! Bookmark not defined.4.19 Are the expert mechanics available to repair motorbike? (Testing Hypothesis 4)..............................................................................................Error! Bookmark not defined.4.20 When it comes to service the motorbike, where would you prefer? (TestingHypothesis 4) ............................................................... Error! Bookmark not defined.4.21 Select one from given motorcycle brands which you would like to recommend to...others? (Testing Hypothesis 1) ..................................... Error! Bookmark not defined.

CHAPTER 5 FINDINGS AND CONCLUSION ....................Error! Bookmark not defined.5.1 FINDINGS ..................................................................... Error! Bookmark not defined.5.2 CONCLUSION .............................................................. Error! Bookmark not defined.

BIBLIOGRAPHY .................................................................... Error! Bookmark not defined.APPENDICES .........................................................................Error! Bookmark not defined.
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Preface


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CHAPTER 1

INTRODUCTION


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1. INTRODUCTION

1.1 GENERAL INTRODUCTION TO THE STUDY

Two-Wheeler industry is one of the largest industries in the automobile sector of global

market. Being the leader in product and process technologies in the manufacturing sector, it

has been recognized as one of the drivers of economic growth. During the last decade, well-

directed efforts have been made to provide a new look to the automobile policy for realizing

the sector's full potential for the economy. The liberalization policies have led to continuous

increase in competition which has ultimately resulted in modernization in line with the global

standards as well as in substantial cut in prices. Aggressive marketing by the auto finance

companies have also played a significant role in boosting automobile demand, especially

from the population in the middle income group.

Presently many international brands like Honda, Suzuki, etc. are competing with Pakistani

brands such as Hero, Star etc. to capture Pakistani markets.

These aggressive marketing strategies have resulted in making the consumer the major key

for success in the industry. Each product offering is now designed to meet and exceed the

expectations of the consumer. But understanding consumer behaviour and knowing

consumers is never simple. And it is more difficult that to understand what a consumer

perceives about the product. Customers may say one thing but do another. They may not be

in touch with their deeper motivations. They may respond to influences that change their

minds at the last moment.

1.2 THEORETICAL BACKGROUND OF STUDY

1.2.1. Market

The term marketmay be considered as a convenient meeting place where buyers and sellers

gather together for the exchange of goods and services. Market means a group of people

having unmet wants, purchasing power to make their demand effective and the will to spend

their income to fulfill those wants. Today a market is equated with the total demand.

The American marketing association defines a market, as the aggregate demand of potential

buyers for a product or service.


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Under keen competition, a marketer wants to create or capture and retain the market i.e.

customer demand through an appropriate marketing mix offered to a target market. The

market offering i.e. supply must meet customer demand, which are unmet needs and desires.

1.2.2. Marketing

Marketing is a comprehensive term and it includes all resources and set of activities

necessary to direct and facilitate the flow of goods and services form the producer to the

consumer through the process of distribution. Businessmen regards marketing as a

management function to plan promote and deliver products to the clients or customers.

Human efforts, finance and management constitute the primary resources in marketing.

We have twin activities, which are most significant in marketing:

1. Matching the product with demand i.e. customer needs and desires or the target market.

2. The transfer of ownership and possession at every stage in the flow of goods from the

primary producer to the ultimate consumer.

The American marketing association defines marketing as the process of planning and

executing the conception, pricing, promotion and distribution of ideas, goods and services to

create exchanges that satisfy individual and organizational objectives.

1.2.3. Marketing Management

Marketing management represents an important functional area of business management

efforts for the flow of goods and services from the producer to the consumers. It looks after

the marketing system of the enterprise. It has to plan and develop the product on the basis of

known customer demand.

Marketing management may be defined as, a process of management of marketing programs

for accomplishing organizational goals and objectives.

Marketing management has to build up appropriate marketing plan or marketing mix to fulfill

the set goals of the business. It has to formulate sound marketing policies and programs. It

looks after their implementation and control. It has to implement marketing strategies,

programs and campaigns. It must evaluate the effectiveness of each part of marketing mix

and introduce necessary modifications to remove discrepancies in the actual execution of

plans, policies, strategies, procedures and programs.


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1.2.4. Marketing Mix

Marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in

the target market.

There are four elements or variables that make a marketing mix, they are:

1. Decisions on product or service.

2. Decisions on promotion

3. Decisions on price

4. Decisions on distribution.

The four ingredients are closely interrelated. Under the systems approach the decision in one

area affects action in the other. Marketing mix decisions constitute a large part of marketing

management.

According to Philip Kotler the term marketing mix is, the set of controllable variables that

the firm can use to influence the buyers response. In the simplest manner, the basic

marketing mix is the blending of four inputs or sub mixes, which form the core of the

marketing system.

Product mix decision refers to decisions on product variety, quality, design, features, brand

image, packaging, sizes, services, warranties and returns.

Price mix decision refers to decisions on the product list price, discounts, allowances, andpayment period and credit terms available.

Place mix decision refers to decisions on the channels, coverage, assortments, locations,

inventory and transport of the market offering.

Promotion mix decisions refer to decisions on the products advertising, sales promotion, sales

force, public relations and direct marketing. Together they form the four Ps of marketing.

1.2.5. Marketing Planning

A marketing plan lies down in writing the marketing objectives, programs and policies to be

adopted to achieve the set marketing objectives. Even before an integrated marketing plan is

prepared the company shall prepare functional plan for each component of marketing mix. To

have a sound marketing plan, every operation is to be examined and the problems are to be

identified. The overall marketing plan should be linked to the distribution channel of the

company to have effective marketing operations.

The marketing planning covers the preparation of functional plans, integration of this plan

and the preparation of master marketing plan to serve the objective of the organization.Marketing planning is bound to get a better hold of environmental factor.


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1.2.6. Marketing Research

Marketing research is the systematic gathering, recording and analyzing of the data about

problems connected to the marketing of goods and services i.e. problems relating to product,

price, promotion and distribution of the 4ps of the marketing mix.

Marketing research is concerned with all those factors, which have a direct impact upon the

marketing of products and services. Marketing research has grown along with the expanded

role of marketing as the focus for the business decision-making.

1.2.7 Need of marketing research

Marketing research is conducted for different purposes. They are:

1. To estimate the potential market for a new product.

2. To know the reactions of consumers to a product already existing in the market.

3. To find out the general marketing condition and tendencies.

4. To know the types of consumer buying and their buying motives.

5. To know the reactions of failure of a product already in the market.

6. To assess the strength and weakness of competitors.

1.2.8 Consumer

A person who purchase or has the capacity to purchase the goods of service often for sale by

the marketing firm in order to satisfy personal need and desires.

1.2.9 Perception

Perception is the sensing of stimuli external to the individual organism the act or process of

comprehending the world in which the individual exists.

Perception has been defined by social psychologists as the Complex process by which

people select organize and interpret sensory stimulation in to a meaningful and coherent

picture of the work.

1.2.10 Attitude

Social psychologist defined attitude as an emotionalized predisposition to respond positively

or negatively to an object. Predisposition can be thought of as categories of meaning stored in

the memory of a person and are based on previous experience. Predisposing the person to

have in specific manner towards a certain objects in the environment.


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1.2.11 Brand

A brand is a name, term, symbol, design or a combination of them which is intended to

identify the goods or services of one seller or group of sellers and to differentiate them from

those of competitors.

1.2.12. Consumer Behavior

The term consumer behaviorcan be defined, as, the behavior that the consumer display in

searching for, purchasing, using and evaluating products, services and ideas, which they

expect, will satisfy their needs. The study of consumer behavior enables marketers to

understand and predict consumer behavior in the market place; it also promotes

understanding of the role that consumption plays in the lives of individuals.

Consumer behavior refers to all psychological social and physical behavior of potential

consumers as they become aware of, evaluate, purchase and consume and tell others about

products and services. It is the pattern of response of buyers to marketing offer of a firm. It

refers to the process as how consumers make their purchase decisions. It is concerned with

what, why, how much, when and from whom buyers make their purchases of goods and

services.

1.2.13 Model of consumer behavior

The starting point of understanding consumer behavior is the stimulus-response model.

Marketing and environmental stimuli enter the buyers consciousness. The buyers

characteristics and decision process lead to certain purchase decisions. The marketers task is

to understand what happens in the buyers consciousness between the arrival of outside

stimuli and the buyers purchase decisions.

1.2.14. Major Factors Influencing Consumer Behavior

Consumers buying behavior is influenced by cultural, social, personal and psychological

factors.

Cultural Factors

Cultural factors exert the broadest and deepest influence on consumer behavior. The roles

played by the buyers culture, subculture and social class are particularly important.

o Culture

Culture refers to that complex whole which includes in it knowledge, beliefs, art or

anything man acquires as a member of society.


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o Subculture

Each culture consists of smaller subcultures that provide more specific identification and

socialization for their members. Sub cultures include nationalities, religions, racial groups

and geographic regions.

o Social Class

Virtually all-human societies exhibit social stratification. Stratification sometimes takes

the form of a caste system where the members of different castes are reared for certain

roles and cannot change their caste membership more frequently; stratification takes the

form of social class.

Social Factorso Reference Groups

A persons reference groups consists of all the groups that have a direct or indirect

influence on the persons attitudes or behavior.

o Family

The family is the most important consumer buying organization in the society and it

constitutes the most influential primary reference group.

o Roles and statuses

A person participates in many groups, family, clubs, organizations etc. The persons

position in each group can be defined in terms of role and status. A role consists of the

activities that a person is expected to perform. Each role carries a status.

Personal Factors

o Age and stage in the life cycle

People buy different goods and services over their lifetime. Taste in clothes, furniture and

recreation is all age related.

Consumption is shaped by the family life cycle. Marketers often choose life-cycle groups

as their target market.

o Occupation and economic circumstances

Occupation also influences a persons consumption pattern.

Product choice is greatly affected by economic circumstances; spendable income, savings

and assets, debts, borrowing power and attitude toward spending versus saving.

o Lifestyle


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People from the same subculture, social class, and occupation may lead quite different

lifestyles. A lifestyle is the persons pattern of living in the world expressed in activities,

interests and opinions. Lifestyle portrays the world person interacting with his or her

environment.

o Personality and self concept

Each person has a distinct personality that influences buying behavior. It is that

distinguishing psychological characteristics that lead to relatively consistent and enduring

responses to environment. Related to personality is self-concept or self image. Marketers

try to develop brand images that match target markets self image.

Psychological Factors

o Motivation

A person has many needs at a given time. A need becomes a motive when it is aroused to

a sufficient level of intensity. A motive is a need that is sufficiently pressing to drive the

person to act.

o Perception

Perception is the process by which an individual selects, organizes and interprets

information inputs to create a meaningful picture of the world. How a, motivated person

actually acts is influenced by his or her perceptions of the situation.

o Learning

When people act they learn. Learning involves changes in an individuals behavior

arising from experience. Learning theory teaches marketers that they can build up

demand for a product by associating it with strong drives, using motivating cues and

positive reinforcement.

o Beliefs and attitudes

Through doing and learning, people acquire beliefs and attitudes. These in turn influence

buying behavior. A belief is a descriptive thought that a person holds about something.

The beliefs make up product and brand images and people act on these images.

An attitude is a person enduring favorable or unfavorable evaluations, emotion feelings

and action tendencies toward some object or idea. Thus a company would be well advised

to fit product into existing attitudes rather than try and change peoples attitudes.


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CHAPTER 2

RESEARCH DESIGN


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2. RESEARCH DESIGN

2.1 Introduction

The two wheeler industry in Pakistan collectively produces 5 Lakh vehicles a year. Some

players have managed to cut through consumer resistance with innovation, pricing and

aggressive marketing. The competition level in the two wheeler industry is very high now.

Many brands are fighting in the market for maximum share. They have to bring out a lot of

differentiation among them. The major duty of the marketer is to know the reasons for

preferring particular motor bike by the consumers.

2.2 Review of Literature

The Customer Perception Report includes questions in four key areas, Expectations, Purchase

Decisions, Customer Service, and Future Purchases. So the customer should be invited to

participate in the survey. Setting realistic expectations during the sales process is a vital

component of making happy customers. How a company sets and meets product and service

expectations plays a pivotal role in fashioning customer opinions. How a company meets or

exceeds expectations is measured in three important areas: product/service, support, and

price. These three areas will be used to factor a score for the Expectations category. The

results of the three questions will be used to factor an overall expectations perception score.

The Purchase Decision category gives us a better understanding of how the customer

perceives the purchase process. Two key areas for questions include an open ended question

on why they purchased and a ratings question on their experience. The rating

Question data will be used for the analysis of Purchase Decision category. The open ended

responses from the Why questions will be used for product strengths analysis. The results

of the purchase experience question will be used for the overall Purchase perception analysis.

Customer service is one of the most important differentiations a company can have. For this

report, customers will rate a company in three key areas: customer service, timeliness for

problem resolution, and expertise. These three areas will be used to factor a score for the

Customer Service category.

2.3 Purpose of Literature Review

Literature review is one of the prime parts of every project. The very basic purpose of the

literature review is to gain insight on the theoretical background of the research problem. Ithelps the researcher to gain strong theoretical basis of the problem under study and also help


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to explore whether any one has done research on the related issue. Thats why literature

review helps one to find out the path of problem solving. In this regards the very basic

purpose of the literature review in this dissertation is same as mentioned

2.4 Statement of the Problem

We want to find out the main buying factor which influence towards the buying decision of

motor cycle, choice of brand, budget limitation, mobility convince, parking problem, and

maintenance at low cost.

2.5 Need of the study

We observed that in a last two decades, peoples are mostly liken to acquire the motorbikesfor daily usage, and we also observed due to this buying trend so many new companies arrive

in Pakistan to introduce new brands in Pakistani Market. There is no doubt that the old

companies market share is falling down. So this study will help to understand and identify

what the consumer feels or perceives about motor bikes. This will help the marketer to

identify which all are the factors that a consumer looks in to when he selects a particular bike.

And also explains how a consumer selects and interprets the qualities of bike.

2.6 Objectives of the Study

The research has been undertaken with following hypothesis:

1. To analysis people perception towards the motor cycle brands.

2. To get feedback what people expect from motor cycle.

3. To analyze people perception towards services offered by different makes

performance of the motor cycle.

4. Analysis financial factor influence buy process of motor cycle

2.6 Methodology

The research will be done through survey method. The collection of data will be done

through questionnaire, interview and related websites

The sample size taken for this research is 200 customers those who are having motor bikes.

The area of this survey consists of Karachi city.


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The collection of data will be done with the help of a structured questionnaire. The designing

of questionnaire needs precision and classification of the subject, so that the respondents can

easily understand the question and can answer it sincerely and correctly.

2.7 Sources of Data

Primary data:-

Primary data consists of original information for the specific purpose at hand. It is first hand

information for the direct users of respondents. The tools used to collect the data may vary

and can be collected through various methods like questionnaire, personal interview

Secondary data:-

Secondary data is the data which is already been collected and assembled. This data is

available with the companies or firms and it can be collected from newspapers, periodicals,

magazines, websites etc.

Sample Design

Sample

The sample size taken for this research is 200 customers having motorbikes.

Sampling Technique

Convenient Sampling technique is used for this project.

Data Collection Tool

Questionnaires will be used as the primary form of collecting data.

Statistical techniques

1. Bar Diagrams

2. Pie-Chart

Statistical tools

1. Statistical software like SPSS 17.0


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2.8 Scope of the study:-

The study helps in having an awareness of customer satisfaction towards motorbike

usage. As the vehicle had a good convenient transportation in town of Karachi, this study will

help to know that how motorcycle increase their grip in vehicle industry. It also helps us to

increase our practical knowledge towards marketing of a motorbike.

2.9 Limitations of the study:-

a) In this study it is not possible to collect the opinion of all the customers owing to

personal constraints. So the assumptions are drawn on the basis of the information

given by the respondents.

b) The study needs to be completed within a specified time of one month and in

certain restricted areas. So the findings cannot be generalized as a whole.

2.10 CHAPTERIZATION

1. Introduction

2. Research Methodology

3. Profile of the Industry

4. Analysis of the Data Collected

5. Finding and Conclusion

Bibliography

Appendix


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CHAPTER 3 PROFILE

OF THE INDUSTRY


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3. PROFILE OF INDUSTRY

3.1 ANALYSIS OF PAKISTANI INDUSTRY

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 CCSuzuki 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


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Pakistan. The Industry specific deletion program (ISDP) books were published and distributed

amongst the stakeholders, which resulted in a significant improvement in indigenization.

3.2 Major Policies after year 2005

1. Tariff Based Systems (TBS)

2. Auto Industry Development Program (AIDP).

FINAL REPORT

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 consultativedialogue 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 indigenized by June 2004 have been placed at higher rate of Customs

Duty.

3. Parts not indigenized would be allowed at CKD rate of Custom Duty.

Introduction of Statutory Regulatory Order (SRO):

1. SRO 656 (I) / 2006 dated June 22, 2006 (For OEMs)


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2. SRO 693 (I) / 2006 dated July 1, 2006 (For OEMs)

3. SRO 655(I) / 2006 dated June 22, 2006 (For Vendors)

For the purpose to handle the switching from ISDP to TBS and to ensure stable policies the

consultations on the development of AIDP kicked off from the 8 March, 2006 Workshop atIslamabad by clearly defining the objectives at a time when the industry was switching over from

the deletion programs to a competitive tariff based system. There was realization that the

transition phase may affect the rapid growth and sustainable development of auto industry. A

comprehensive development program with pre-announced tariffs to provide predictable and

stable environment was therefore much needed and the finalization and approval of AIDP by the

government was held on 13th November, 2007.

Policy Wise Growth of Auto Sector (PC + LCV):


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The automobile industry in Pakistan can be broadly categorized into following segments:

Cars and Light Commercial Vehicles (LCVs)

Two and Three Wheelers

Tractors

Trucks and Buses

Vendor Industry.

The industry operates under franchise and technical cooperation agreements with Japanese,

European and Korean manufacturers.


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3.3 Problems Faced By the Automobile Industry

The automobile industry of Pakistan is an oligopoly with 22 automobile OEMs producingpassenger cars, commercial vehicles, tractors and motor cycles in collaboration with Japaneseand Korean manufacturers. The major assemblers/manufacturers are Pak Suzuki Motor Co. Ltd.,Honda Atlas Cars (Pakistan) Ltd., Hinopak Motor Ltd., Indus Motor Co. Ltd., Ghandhara NissanLtd., Ghandhara Industries Ltd., Atlas Honda, Suzu

Automobile Industryupdated 27 Jan 2010!

Compiled by:Mirza Rohail B

Pakistan is an emerging market for automobiles and automotive parts offers immense business

and investment opportunities. The totalcontribution of Auto industry to GDP in 2007 is 2.8% which is likely to increase up to 5.6% inthe next 5 years. Total gross sales of automobiles in Pakistan were Rs.214 billion in 2006-07 or$2.67 billion. The industry paid Rs.63 billion cumulative taxes in 2007-08 that the government

has levied on automobiles.There are 500 auto-parts manufacturers in the country that supplyparts to original equipment manufacturers (PAMA members). Auto sector presently, contributes16% to the manufacturing sector which also is expected to increase 25% in the next 7 years, ascompared to 6.7 percent during 2001-02.Vehicles manufacturers directly employ over 192,000people with a total investment of over $ 1.5 billion. Currently, there are around 82 vehiclesassemblers in the industry producing passengers cars, light commercial vehicles, trucks, buses,tractors and 2/3 wheelers. The auto policy is geared up to make an investment of $ 4.09 billion inthe next five years thus, making a target of half a million cars per annum achievable.

Government of Pakistan had undertaken two major initiatives in the form of National TradeCorridor Improvement Program (NTCIP) and Auto Industry Development Program (AIDP) for

the development of the automotive industry in Pakistan.

Engineering Development Board (EDB) is actively implementing the AIDP to increase the GDPcontribution of the automotive sector to 5.6%, boost car production capacity to half a millionunits as well as attract an investment of US$ 3 billion and reach an auto export target of US$ 650million.
http://economicpakistan.wordpress.com/2008/02/08/automobile-industry/http://economicpakistan.wordpress.com/2008/02/08/automobile-industry/http://economicpakistan.wordpress.com/2008/02/08/automobile-industry/


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Automotive engineering is a driving force of large scale manufacturing, contributing US$ 3.6billion to the national economy and engaging over 192,000 people in direct employment.

The Auto parts manufacturing is $ 0.96 billion per annum. The demand for auto parts is highestin the motor cycle industry which is 60%, then is for cars which constitutes to 22% and the rest

18% is consumed by trucks, buses & tractors. This demand is met by Imports which caters 22%while the remaining 78% is supplied by the local manufacturers.

Due to the increase in demand for sophisticated machinery, the government has allowed dutyfree import of raw

Honda Civic

material, sub components, components assemblies for manufacturers & assemblers. Total importbill of machinery stands at $2.195 billion in the current fiscal year of 2007-08 which is 12.77%

higher than that of the preceding year.

The impressive growth in the machine tools and automation sector is directly proportional to thegrowth of the automotive industry which has become the fastest growing industry of Pakistanand contributes $3.6 billion annually to the countrys GDP.

The aftermarket for spares has also witnessed immense expansion over the same period, withimported parts playing an important role in meeting local demand. The spare parts market isgiven further impetus by a total vehicle population of approximately 5.4 million

Pakistan has the second highest number of CNG-powered vehicles in the world with more than

1.55 million cars and passenger buses, constituting 24% of total vehicles in Pakistan withimproved fuel efficiency and conforming to the latest environment regulations.

According to Government Board of Investment,

Automotive

Industry

No of

UnitsNumber 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007

Cars 5 164,000 40,601 62,893 99,263 126,817 160,642 176,016 164,


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Jeeps 2 - - - - - - 3,298 1,59Light Vehicles 4 32,500 8,491 12,174 14,089 23,613 29,581 19,672 21,3Trucks 5 17,500 1,141 1,954 2,022 3,204 4,518 4,410 4,99Buses 5 3,900 1099 1,340 1,380 1,762 825 993 1,14Tractors 3 50,000 24,331 26,501 36,103 43,746 49,439 54,610 53,6

Motor Cycles 55 733,000 133,334 176,591 327,446 571,145 744,875 839,224 1,05

VISION 2012: The Future of Pakistan Auto Industry

Product 2007-8 VISION 2012

Cars (nos.) 164,710 500,000

2 wheelers 1.06 million 1.7 million

Investment (Billion) 98 225

Contribution to GDP (%) 2.8 5.6

Contribution to manufacturing sector(%)

16 25

Direct Employment 192,000 500,000

Gross sales turn over (Billion) 214 600

Decline in Sales and Revenue

Unfortunately, the recent downward trend in auto sales (cars + LCVs) continued as auto salesstood at 27,034 units for July-September 2008, showing a decline of 44 percent year-on-year, thedata released by Pakistan Automobiles Manufacturers Association (PAMA) shows. (Link)

Automobile grew from 2001-2007, the industry and the government of Pakistan fixed a target ofover half million units production by the year 2011-12 that now seems out of reach. Theindustry slightly fell short to achieve the targeted productions in 2006-07 when 1,95,688 carswere manufactured against a target of 2,26,620 units. However, there was some growth inproduction that year. In 2007-08 the production declined to 1,87,634 units against a projectedtarget of 2,66,543 units. In the current fiscal year they said the production is expected to declineto 1,50,107 units that are half the projected target of 3,13,486 units.

Despite an additional levy of 5 per cent excise duty, the revenues from automobile sector woulddecline by over 25 per cent this year due to declining demand. The industry paid Rs.63 billioncumulative taxes that the government has levied on automobiles. This year, despite additionalduty the sector would hardly contribute Rs50 billion in the national exchequer.
http://www.dailytimes.com.pk/default.asp?page=20081012story_12-10-2008_pg5_3http://www.dailytimes.com.pk/default.asp?page=20081012story_12-10-2008_pg5_3


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Automobile Manufacturers and Vendors concerns

Automobile manufacturers and auto-parts vendors have warned the government that despite anadditional levy of 5

Chevrolet Assembly Port Qasim

per cent excise duty, the revenues from automobile sector would decline by over 25 per cent thisyear due to declining demand.

The Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) and PakistanAutomobile Manufacturers Association (PAMA) in a joint presentation have suggested varioussteps that should be taken by the government to arrest the slowdown in sales. The twoassociations appealed to the government to withdraw the 5 per cent excise duty on cars andimpose a ban on import of used parts instead of allowing their import after imposing 30 per cent

redemption duty.

They asked the government to place stringent checks on auto-parts imported commercially or assemi knock out kits. They proposed the introduction of non-tariff measures to curb the import ofparts that are being manufactured in Pakistan. They pointed out that the 50 per cent duty hasfailed to stop the import of these parts as the import prices are easily manipulated by theimporters. Moreover, import under SRO 63 attracting 50 per cent duty should not be allowedunder FBRs CARE system. They have also appealed for special incentives for the auto sectorincluding lower mark-up on loans and a waiver of 35 per cent L/C margin.

The two associations pointed out that investment in the automobile sector has frozen at Rs98

billion and is expected to remain at the same level by 2011-12.

Honda Atlas Cars Pakistan Ltd
http://www.honda.com.pk/pakistan/index.htmlhttp://www.honda.com.pk/pakistan/index.htmlhttp://www.honda.com.pk/pakistan/index.html


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Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited

Japan, and the Atlas Group of Companies,Pakistan. The company was incorporated on November 1992 and joint venture agreement wassigned on August 1993. The ground breaking ceremony was held on April 17, 1993 and within arecord time of 11 months, construction and erection of machinery was completed. The first carrolled off the assembly line on May 26, 1994. Official inauguration was done by President ofPakistan, Sardar Farooq Ahmad Khan Leghari. Mr Kawamoto, President of Honda MotorCompany Limited Japan was also present to grace the occasion. The company is listed on

Karachi, Lahore and Islamabad Stock Exchanges. In July 1994, car bookings started at sixdealerships in Karachi, Lahore, and Islamabad. Since then the Dealerships Network hasexpanded and now the company has sixteen 3S (Sales, Service and Spare Parts) and thirty 2S(Service and Spare Parts) Pitstops network in all major cities of Pakistan. Since thecommencement of production in 1994, the company has produced and sold more than 150,000cars till Oct, 2008. All dealerships are constructed in accordance with the standards defined byHonda World over.

Indus Motor Company

Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor

Corporation Japan (TMC), Daihatsu Motor Company Ltd vehicles in Pakistan through itsdealership network. The company was incorporated in Pakistan as a public limited company inDecember 1989 and started commercial production in May 1993. The shares of company arequoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota TsushoCorporation have 25 % stake in the company equity. IMCs production facilities are located atPort Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motorcompanys plant is the only manufacturing site in the world where both Toyota and Daihatsubrands are being manufactured. IMCs Product line includes 6 variants of the newly introducedToyota Corolla, Toyota Hilux Single Cabin 42 and 4 versions of Daihatsu Cuore.
http://www.toyota-indus.com/http://www.toyota-indus.com/http://www.daihatsu.com/http://www.daihatsu.com/http://www.toyota-indus.com/


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Altis

Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing andmarketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in soledistributorship of Toyota.

Pak Suzuki Motor Company

Pak Suzuki Motor Company Ltd (PSMCL), established as a joint venture between Suzuki MotorCorporation of Japan (SMC) and Pakistan Automobile Corporation (PACO) Govt. of Pakistan in1983. Started commercial operations with production (S.O.P.) of Suzuki FX in 1984. In 1992,started production of MARGALLA at new Plant. In 1997, started production of 1300ccBALENO replacing Margalla. In 2001, launched the CNG version of MEHRAN, RAVI andBOLAN. By 2005 capacity expansion up to 80,000 vehicles per year were completed. In 2006,capacity expansion up to 120,000 vehicles per year was completed and production of1300cc/1600cc car LIANA and BALENO commenced. In 2007, the

third phases of capacity expansion up to 150,000vehicles per year were completed. Amalgamation of Suzuki Motorcycle Pakistan Ltd into PakSuzuki Motor Company Ltd took place and new land of 120 acres was acquired for furtherexpansion adjacent to current plant. In 2008, the company started exporting Suzuki LIANA toBangladesh. Pak Suzuki acquired a land of 25.22 acres at Lahore for setting up PDI centre, SpareParts Ware-house, Regional Office and other related facilities.

Nexus Automotive
http://www.paksuzuki.com.pk/http://www.paksuzuki.com.pk/http://www.paksuzuki.com.pk/


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Chevrolets were sold in Pakistan well into the 1970s, after which the automotive regime was

changed and Chevrolet gradually withdrew to itshome market in the United States. In 2004, after an absence of three decades, Chevrolet was re-introduced in Pakistan. Once again, a global brand with a product line-up suited to developingmarkets such as Pakistan, Chevrolet has made a successful return to the country. Working withNexus Automotive, General Motors partner in Pakistan , Chevrolet can once again be seen onroads all over the country. Today, Nexus Automotive assembles the 1000cc Chevrolet Joy at Port

Qasim (Sindh), and imports a broader line-up of cars, including Aveo, Optra, and Colorado(coming soon) from the General Motors global network.

Al-Ghazi Tractors

Al-Ghazi Tractors Limited (AGTL) was incorporated in 1983. In 1991 the project was offeredfor privatization, and

Al Ghazi Tractors

acquired by Al-Futtaim Group of Dubai who took over the management control of AGTL inDecember 1991. Ever since AGTL is a case study of rollicking corporate success. 50.02%shares of the company are held by Al-Futtaim Industries Co. LLC and 43.17% shares are held byCNH Global NV, with whom Al-Ghazi Tractors Limited has signed an Industrial Collaboration


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Agreement for manufacture of New Holland brand tractors. The Agreement is valid till April2016. With expansions carried out in 2005, the plant is now capable of producing 30,000+tractors per year in a single shiftthe most enduring competitive edge being the quality of ourtractors, which are robustand sturdy and carry a local content as high as 92%. AGTL was the first automobile company in

Pakistan to earn the ISO-9002 Certificate.

Dewan Motors

Dewan Farooque Motors Limited has one of the most advanced automobile assembly plants ofSouth Asia. Located at

Dewan Motors

Dewan City, Sujawal, Thatta, with a total project cost of Rs. 1.8 billion, the plant is built on anarea of 42,000 square meters. Selection of the site reflects the commitment of Dewan Grouptowards building of a prosperous Pakistan and its contribution to national wealth. The project hasprovided direct employment to over 700 personnel. The plant is the first automobilemanufacturing unit in Pakistan to be independently invested by 100% Pakistani investors. Theannual capacity of the plant is 10,000 units on a single shift basis. The groundbreaking ceremony

for the plant was held in June 1999, and the first Kia Classic rolled-out in a record time of sixmonths. Today the modern state-of-the-art plant is rolling-out cars every day. This is the first andonly automobile assembly plant in Pakistan with state of art robotic equipment. Dewan FarooqueMotors Limited has technical collaboration and license agreements with the following Koreancompanies:Hyundai Motor CompanyDecember 25th 1998Kia Motors CorporationJuly 27th 1999

Ghandhara Industries

The Ghandhara Industries Limited is a public limited company quoted on the Stock Exchangesand registered under the Companies Act, 1913 (now companies Ordinance, 1984). It wasestablished in Karachi by General Motors Overseas Distribution Corporation U.S.A. in 1963 Lt.Gen. M. Habibullah Khan Khattak acquired these facilities from General Motors and renamed itGhandhara Industries Limited. The Government of Pakistan nationalized Ghandhara IndustriesLimited in 1972 and renamed it National Motors Limited. In 1992 M/s. Bibojee Services (Pvt)ltd. acquired it under Privatization Policy of the Government, and adopted its original nameGhandhara Industries Limited w.e.f. 27-11-1999. The major business activities of the companycomprise of progressive manufacture, assembly and marketing Isuzu truck and bus chassis and
http://www.dewan-motors.com/http://www.dewan-motors.com/http://www.gil.com.pk/http://www.gil.com.pk/http://www.gil.com.pk/http://www.dewan-motors.com/


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fabrication of Bus and Load bodies. Ghandhara industries Ltd have a product range of ISUZUmedium-duty vehicles (F-Series) & light-duty Vehicles (N-Seies) in Pakistan.

Hino-Pak Motors Ltd

Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group ofUAE and PACO Pakistan formed Hinopak Motors Limited in 1986. In 1998, Hino Motors Ltd.,and Toyota Tsusho Corporation obtained majority shareholding in the company afterdisinvestments by the other two founding sponsors.

Adam Motor Company

We would do great injustice if we fail to mention, the only large scale effort made by a Pakistani

to achieve what others failed to implement oreven envision. Mr.Feroz Khan, founder of the Adam Motor Company, Ltd. was an automobileassembler based in Karachi, Pakistan. They were notable for producing theRevo, which wasPakistans first homegrown company to assemble a decent car. Together with styler MehmoodHussain, Chief Engineer N. A. Salmi and two fresh graduates from NED, Khan designed and

manufactured Pakistans first car. In fact, Khan invested in the latest software programs to trainhis team using Computer Aided Design (CAD) and Computer Aided Manufacturing (CAM).Khan is also Chairman and CEO of Omar Jibran Engineering Industries and has twice beenChairman of Pakistan Association of Automotive Parts and Accessories Manufacturers. All theirvehicles used Made in China components due to lack of a modern manufacturing industry inPakistan. Initially Adam Motor was involved in assembling cheap Made in China light trucks,followed by a Made in China four-wheel drive off-road vehicle. Later they started manufacturingthe Revo. The 800CC version of the Revo costs Rs. 269,000 (about $4,500) and the 1050 modelis Rs. 369,000 (about $6,200). The Revo has also been built in accordance with EU safetyregulations. Mr. Feroz Khan blames the politicians for the companys failure.
http://www.hinopak.com/http://www.hinopak.com/http://www.adammotor.com/default.htmhttp://www.adammotor.com/default.htmhttp://www.adammotor.com/default.htmhttp://www.hinopak.com/

2 wheeler industry

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