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MOTORCYCLE INDUSTRY BOUND TO FLOURISH.

Byline: SHAMSUL GHANI

Government failure to provide to the masses a cheap, safe, and organised public transport system has given a stimulus to the motorcycle industry of Pakistan. The industry has grown more by compulsion than by industrial logic. Excessive use of personal transport results in traffic congestion, pollution, and wasteful energy consumption. Developed nations avoid these problems by providing an organised, well regulated and easily affordable mass transport system to their citizens. This not only relieves pressure on resource utilisation but also improves the quality of life. When seen in this perspective, Pakistan's transport system portrays an unseemly picture of chaos, human degradation, and perverted civic sense.

The responsibility squarely falls on the governing bodies who have allowed corruption and mafia-rule to destabilise public transport system to the point of irreparability. Gossip has it that hefty sums of money are paid to the authorities by the transport mafia to impose/extend the ban on pillion riding. An economically downtrodden and socially depraved nation can hardly be expected to take any more. If public transport system is not improved, no matter what the resource position is, it is difficult to make headways to economic prosperity.

TABLE-1: MOTORCYCLES' PRODUCTION AND MARKET SHARES

COMPANY/BRAND###2005-06###2006-07###2007-08###2008-09###2009-10###MKT. SHARE%

Honda###360561###331621###452791###349525###483028###65.5

Yamaha###74423###56282###64254###66190###120788###16.4

Suzuki###16954###27309###33780###14592###18550###2.4

Sohrab###14804###7514###6073###6966###7044###0.9

Sohrab (Tri-wheeler)###2166###2817###1972###1732###3813###0.5

Qingqi (2and3 wheeler)###17198###15926###26831###10616###15580###2.1

Hero###34018###25798###22519###21038###35010###4.9

Ravi###-###-###23032###18243###22961###3.2

Sazgar (Tri-wheeler)###-###-###9779###4690###10863###1.4

Habib###-###-###19562###15462###19234###2.7

Total Production###520124###467267###660593###509054###736861###-

Total Sales###516640###467353###662573###507924###737259###100

The demand for motorbikes is guided by negative factors, the messy public transport system being the dominating one. The ever-deteriorating and disorganised public transport system has awakened the masses to the need of owning personal transport means, even at the cost of food, clothing, and shelter. Till 2007, an easy access to consumer credit drove the herds of masses to the doorstep of banks and financial institutions. As a result, the auto industry went into the boom cycle. This brought about a positive social change in the society. That era was criticised by the economic pundits for being unsustainable, consumption-based growth era. They might be feeling relieved to see their prophecy come true. But, this relief is not genuine.

It was not the consumption-led-growth theory that has failed, rather it was the inefficiency and hollowness of political and economic systems that led the industry to an uncalled for recession; the negative contribution of the financial global meltdown notwithstanding. The potential of the industry - with its reliance on domestic market - is still intact. Given the state of public transport system and a high rate of population growth, the motorbike industry's growth is guaranteed.

The high production cost, lack of capital formation, high tariff structure for imported units and manufacturers' greed for higher profits turn the indigenous auto production into a product that could be sold only in the domestic market. China exports about 40 percent of its motorbike production. Thailand exports about 28 percent of its production. India produces 7.7 million units of motor bikes annually out of which seven percent are exported. Pakistan produces around 750,000 units annually and is able to export just one percent of it or even less. Pakistan's share in the $600 billion world auto market is $50 million only. One single manufacturer, Honda, dominates the domestic motorbike market.

This scenario rules out the possibility of a fare and fierce competition that results in low prices for the consumers. Since auto industry could well be described as an assembler industry, the depreciating rupee deals a severe blow to the middle and lower middle class consumers as the cartelised producers of motorcycles increase their prices at will on the pretext of high cost of imported parts.

The forward and backward linkages of motorbike industry are deep and varied. On backward side, metals, rubber, paint, glass, plastic, electrical, and magnetic equipment etc go into the production process. The shift in demand for motorbikes is transmitted to the link industries impacting their production volume and prices. On the forward side, linkages such as distribution channels, logistics, warehousing, advertising, insurance and finance etc play an important role in shifting the product from the factory to the market and then to the customer. Production and sale of 750,000 units involves the major segments of economy directly or indirectly.

A study by the Competitiveness Support Fund carried out in 2006 provided notable projections (Table-2) of demand for new motorcycles.

TABLE-2

YEAR###PROJECTED PER###PROJECTED###PROJECTED###TOTAL

###INCOME IN CAPITA###POPULATION###PER NEW###ANNUAL###

###US DOLLARS###(000'S)###POPULATION###DEMAND UNITS

###MOTORCYCLE

2006-07###966###159573###179###890000

2007-08###1100###162924###154###1050000

2008-09###1255###166.345###132###1250000

2009-10###1430###169839###113###1500000

2010-11###1645###173405###97###1780000

The wide variations in the CSF projected and actual data can be attributed to the global recessionary jolts and domestic political upheaval. Presently one out of 230 persons has the resources to purchase a new motorbike. This purchase too is not voluntary. Rather it is forced by poor public transport system. With the taming of inflation, free flow of credit under a low policy rate regime and further deterioration in the public transport system, the motorbike industry is bound to flourish.
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Publication:Pakistan & Gulf Economist
Geographic Code:9PAKI
Date:Nov 21, 2010
Words:921
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