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Tata Motors is set to launch its low-cost Nano minicar Monday, March 23, according to media reports from India. With a starting price of about $1,945, which doesn't include dealer markup and other charges that consumers will pay, the Nano will be one of the world's cheapest cars. This product launch comes at a time when the auto industry is facing a severe downturn, attributed to the worldwide consumer credit crunch amidst a serious global financial crisis.
Like other auto makers around the world, Tata Motors is also contending with declining demand, both for its bread-and-butter commercial vehicles in India and its luxury brands, Jaguar and Land Rover. The company reported its first quarterly net loss in seven years in the October-December 2008 quarter, and saw its debt rating cut by ratings firms. More immediately, Tata Motors faces a June deadline to repay $2 billion in loans related to its Jaguar-Land Rover acquisition from Ford Motor Co. last year, according to the Wall Street Journal.
The automobile industry in India—the tenth largest in the world with an annual output of 2 million units last year—is expected to become one of the major global automotive industries in the future. A number of domestic companies produce automobiles in India and the growing presence of multinational investment, too, has led to an increase in overall growth. Following the economic reforms of 1991 the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and reduced restrictions. The monthly sales of passenger cars in India exceed 100,000 units, according to a related Wikipedia entry.
In comparison with the rest of the world, the Chinese market for automobiles appears to be relatively robust. Monthly auto sales in China surpassed those in the U.S. for the first time in January, but automakers and industry watchers say the news may tell us more about the troubles in the U.S. than about China's growing car market, says a report published in San Francisco Chronicle.
Data released in February by the China Association of Automobile Manufacturers shows 735,000 new cars were sold in China last month, down 14.4 percent from the record of 860,000 set in January 2008. U.S. sales, meanwhile, fell 37 percent to 656,976 vehicles — a 26-year low.
In Pakistan, Engineering Development Board (EDB) is attempting to increase the GDP contribution of the automotive sector to 5.6%, boost car production capacity to half a million units as well as attract an investment of US$ 3 billion and reach an auto export target of US$ 650 million.
In addition to the growing defense industry, auto industry can become a driving force for the much needed manufacturing industrial base in Pakistan to create significant employment opportunities for its large population. Last year, the auto sector contributed US$ 3.6 billion, only about 2% of the GDP, to the national economy, and employed about 192,000 people.
Pakistan's auto parts manufacturing is a billion US dollars a year industry. Sixty percent of its output goes to the motor cycle industry, 22% is for cars, and the rest is consumed by trucks, buses & tractors.
After a significant growth spurt in 2002-2006, the auto sector is feeling the pain of economic slow-down in Pakistan. The industry is continuing in a slump which began in the previous financial year and according to Business Monitor International's recently published Pakistan Automotives Report, the industry’s performance this year will get worse. In FY08, which ended in June 2008, total vehicle sales fell by 6.2%. The downturn carried over into FY09, with sales for the first half of the year (July to December 2008) down by 48% year-on-year to 52,927 units for cars and light commercial vehicles (LCVs), while compared with November, sales for December were down 55%. These results support BMI’s forecast for a drop in sales of cars and LCVs to around 112,000 units in FY09. BMI expects the total auto market in Pakistan to contract by over 32%, with the worst damage done in the car and bus segments, which is forecast to fall by 45% each. Pakistan’s Economic Co-ordination Committee (ECC) is to consider a tax cut of 10% for domestic car manufacturers, which has been proposed by the Ministry of Industries and Production. However, the plan is not without its opposition, as the Federal Board of Revenue is reportedly against supporting individual sectors as this would prompt other industries to seek help. Moreover, with just five carmakers producing locally, the automotive industry is relatively small. On the other hand, the industry is also largely self-sufficient as the majority of its output is sold within Pakistan; this reduces the country’s reliance on imports and raises issues such as the protection of local jobs and the industry’s contribution to the overall economy.
|Pakistan Tractor Sales. Source: Trading Economics|