He said that the company had a production capacity of 50000 per annum but the utilization of production capacity would depend on the market demand of KIA vehicles. Replying to a question, he said that rupee devaluation had definitely affected the capital cost of KLM but it was not as big that would force the company to fetch up the project.
"All auto makers have increased the prices due to rupee devaluation and KLM will also reconsider its prices before the launch of the vehicles. The concessions given through new entrants policy has allowed new entrants to survive with little localization, due to low volume but later they have to increase localization at maximum level to get sustainable growth," he said.
In Pakistan auto market, the new entrants cannot survive without good degree of localization and initially KLM has localization up to 15 percent in terms of parts and assembly in Sportage and in Picanto, it will be higher than Sportage, he said.
"The pace of localization may be a little slower but not because of the concessionary duty regime or a lack of desire to localize but only due to low volume at the start and simultaneous launch of multiple products not attempted previously". He requested the EDB to now link the very successful tariff based localization regime to volume, so that high technology products having low volume can be introduced viably.
With the hope to have all facilities promised by the government in special economic zones (SEZs) in coming months, CEO KLM lamented that SEZs were established to attract foreign investments but the concerned authority was unable to provide basic amenities i.e. power, gas, road infrastructure, etc so far, creating adverse impression on foreign investors, who were keen to pour investments in Pakistan.
He dispelled the impression that only old players would survive and new entrants would roll-back their projects in case of unfriendly business environment, saying that it was not the case with KIA, which has been re-launched in Pakistan by Lucky group and had ambitious plan for future. He said that in order to unleash this huge potential in the auto industry, Pakistan needs to take some measures.
"Today 30-38% of the value of a car assembled in Pakistan is collected by the government in the shape of various levies. While I cannot advocate lowering of duties on CKD kits only as this would have detrimental effects on the viability of localized parts, it can be advocated to reduce CKD duty and an equivalent reduction of duty on components that go into manufacture of local parts," said CEO KLM adding that the safest reduction of levies would be in the form of reducing sales tax and FED.
"Government should take measures to increase volume so that the revenue to the government is earned by smaller levies on larger volume, rather than larger levies on smaller volumes," he added.