KARACHI: The Yunus Brothers Group (YBG) is in talks with South Korea’s Kia Motors Corporation to set up an auto assembly facility in Pakistan.

The sponsor of Lucky Cement and ICI Pakistan, YBG is in the initial phase of negotiations with the South Korean company and few details are available so far, said BIPL Securities in its report on Monday.

Kia’s latest initiative follows a strong line-up of auto manufacturers, including Nissan-Renault, which has expressed interest in building assembly facilities in the Japanese-dominated auto industry of Pakistan after the introduction of a new auto policy in March.

BIPL said a growing car market, strong potential for growth in demand under the China-Pakistan Economic Corridor (CPEC), low interest rate environment and attractive policy incentives provide a compelling case for foreign automakers to step into the Pakistani market.

Car sales grew at a compound annual growth rate of 17 per cent in three years ending on June 30, 2016.

Pakistan’s car penetration of 13 vehicles per thousand persons is the lowest in the region and hovers at 55pc below the regional benchmark. While details about the size and specs of the new plant – expected to take two to three years to be operational – are still awaited, the investment bodes well for local auto-part manufacturers who will likely expand their operations given the sizeable increase in demand.

The new auto policy envisages doubling the production of cars/vans/jeeps and light commercial vehicles to 429,000 units from the current level by 2021.

BIPL contends that the project will be a win-win proposition for both partners. One player will get access to a new market while the other will be able to diversify its operations into yet another booming sector of the economy following its successful entry into chemical and power sectors.

Pakistanis already had experience of driving locally produced Kia Classic NGV and Kia Spectra from 1999-2000 to 2004-05 under a joint venture with Dewan Motors.

According to the Pakistan Auto­motive Manufacturers Associ­ation (Pama), the production of Kia Classic in 2002-03 was 459 units, which plunged to 188 in 2003-04. Kia Classic’s last year of production was 2004-05 when 465 units were produced.

The production of Kia Spectra in Pakistan began with 890 units in 1999-2000, followed by 1,784 units, 2,091 units, 384 units, 73 units and only one unit in the subsequent five years of its production.

Published in Dawn November 22nd, 2016