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KARACHI: Japan’s Nissan Motor Company on Wednesday inked an agreement with local partner Ghandhara Nissan to start local manufacturing of Datsun passenger cars.
The production and sales of small cars is expected to start within the fiscal year of 2019.
Ghandhara will invest 4.5 billion Pakistani rupees (about $41 million) over the first four years while Nissan Motor will provide technical and skills support.
The production capacity of vehicles will be 32,000 units per annum, which will be gradually increased.
The manufacturers also announced production of 20 percent of parts locally, which will be gradually increased to the current level of 64 percent achieved by existing auto manufacturers.
The project and the development of a retail network is expected to create more than 2,000 direct jobs.
Peyman Kargar, Nissan senior vice president, said the move was part of Nissan’s strategy to engage with emerging automotive markets around the world.
“This entrance to the Pakistan automotive market represents a significant step in the ongoing development of local manufacturing infrastructure and economic activity,” he said.
Kargar said that demand for vehicles has grown to more than 200,000 vehicle a year, which will further increase to 300,000 units. “With the close collaboration and support of the Pakistani government, local production will deliver sustainable benefits for the national economy, customers, partners and Nissan,” he said.
“This agreement will introduce world-class facilities and the best of Japanese engineering technologies,” said Ahmed Kuli Khan Khattak, CEO of Ghandhara.
Khattak called the entry of Nissan into Pakistan’s auto sector a “game changer.”
“By localizing the manufacture of parts and components and boosting development in the auto supplier industry, it will provide Pakistan with technical assistance and promote partnerships with Japan. Customers in Pakistan will benefit from more choice,” he said.
The agreement also covers distribution, providing access to 15 cities initially.
Nissan’s entry will provide a significant boost to the automotive industry, which already accounts for about 4 percent of Pakistan’s GDP.
Nissan and Ghandhara will work together to upgrade Ghandhara’s existing facilities at Karachi’s Port Qasim into a world-class manufacturing plant. The existing plant has been inactive since 2010 after being in operation for 14 years previously.
The entry of Nissan into Pakistan’s market is the outcome of current trade policy for 2016-18. The project has qualified for brownfield category status under the government’s Automotive Development Policy.
Under the “Brownfield investment Status” the Ghandhara Nissan will import parts and components which are not available in Pakistan at 10 percent import duty for three years, and those available in Pakistan will be imported at a rate of 25 percent duty.
Nissan has a global workforce of 247,500 and has been partnered with French manufacturer Renault since 1999. In 2016, Nissan acquired a 34 percent stake in Mitsubishi Motors. Renault-Nissan-Mitsubishi is the world’s largest automotive partnership, with combined sales of more than 10.6 million vehicles in 2017.