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Prolific investment in the tyre manufacturing

Prolific investment in the tyre manufacturing

Based on the mileage it is mandatory for the sake of safety to change the tyres of 800cc car every three years, let alone a sedan or SUV. Four new tyres for a sedan would cost over Rs 65000/- (sixty five thousand rupees) every three years. Cost of tyres for SUV is gigantic. One could have a notion of the enormity of the tyre-business in Pakistan. It is surely a billions of rupees of business in Pakistan, which seems to have maintained quite low profile since it is not in the limelight by and large. One could anticipate that there would be more vehicles both private and commercial in Pakistan in the not-too-distant-future in the wake of CPEC activities since economy would be booming. Cost of tyres of commercial vehicles such as public buses, tractors, trucks etc is massive and tyres of commercial vehicles are changed far more frequently vis-à-vis private cars etc.

The immensity of the tyre-business in Pakistan calls for local and foreign investment, which would surely get tremendous returns on the investment. The government must lure domestic and foreign investment in tyre manufacturing in the country, which would eventually benefit the consumers as well the country’s coffers. The governments of plenty of countries across the globe have been announcing splendid incentives to promote this sector. One could see monumental investment by the European manufacturers in the tyre industry of our neighboring countries, which has eventually generated ample employment opportunities in addition to quality products. The government support in this regard could lure both local as well as foreign investors which could even help spike in the export of tyres from Pakistan.

One of the conundrums for plenty of sectors is the rampant smuggling of the products which has gone unabated for decades. It is time to give precedence to this crucial issue for the sake of local manufacturers and the economy alike. A conservative estimate suggests that 35% of the total demand of tyres is met by the local manufacturers beset by the quality or variant issues at times. However over 20% of the whopping demand is catered to by the legal importers. This leaves us with the chasm of around 45% which might be fulfilled by the unabated smuggling, which has devastated the local investors to a large extent. The manufacturers of tyres for two, three and four wheel vehicles could be counted at the fingertips in Pakistan. There are instances of some Pakistani investors who have invested in this sector in many Asian countries namely India, China, Indonesia and it is termed as ‘collaborative manufacturing’. It is estimated that by restraining widespread smuggling, the national exchequer could stave of losses of billions of rupees during every fiscal year. Deceleration in the duties and taxes underpins the import which could beef up the performance of this sector in the long run encouraging import through official channels. Simultaneously, it must be ensured that deceleration of taxes at the import stage must not be at the expense of the local producers who have invested billions of rupees. A trade off must be ensured for the betterment of the sector and the end users. One of the issues encountered by the consumers could be the availability of various sizes of tyres, which local manufacturers might not be able to cater. Since hundreds of sizes of tyres are required, it calls for monumental investment which is an opportunity for the investors in the given circumstances. The annual consumption of tyres in Pakistan runs in millions of units.

There was a refreshing news in the preceding year, a year ago to be precise, regarding Sino-Pak tyre venture in Pakistan with the investment of around $600 million. This Sino-Pak Tire Manufacturing Joint Venture is an import substitution opportunity and such projects must be encouraged to the hilt. It was announced that five to six million pieces would be produced every year by this joint venture which would include the manufacturing of tyres for trucks, buses and passenger cars.

The strengthening of the rural economy might call for more imports of tyres, which must be encouraged through official channels however indiscriminate import of tyres might constrict the growth of domestic tyre manufacturing in the country which must be given precedence to the import for the long terms benefits. It must also be ensured that the tyres imported through unfair means such as under invoicing or wrong classification do not make their way in the country for the sake of the economic growth.

There is a likelihood to witness the advent of ample foreign investors investing in Pakistan’s tyre and tubes sector sooner rather than later by virtue of the burgeoning demand.

The incentives by the government and the availability of the raw material at low cost would surely spur this sector which has become indispensable at this juncture.

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