Volkswagen in Talks to Make Big Push Into Pakistan

ISLAMABAD, Pakistan – Volkswagen has made significant progress in talks to establish manufacturing operations in this South Asian port city of Karachi, a top government official says.

“Volkswagen Commercial Vehicles is in final talks with Premier Systems, the authorized importer of Audi vehicles in the country, to set up a manufacturing/assembly plant for its Amarok and T6 models and Volkswagen,” Tariq Ejaz Chaudhary, CEO of Pakistan’s Engineering Development Board, confirms to WardsAuto.

A senior official at Premier Systems adds VW is considering establishing production of Audi luxury vehicles in the country.

“Volkswagen Commercial intends to use the same plant Audi intends to build for the assembly of its own vehicles in Karachi,” the official says, adding VW plans to open about 40 dealerships across Pakistan to accommodate rising demand for its Amarok pickup and T6 vans.

The possible launch of the three vehicles in Pakistan’s market of 190 million people follows forecasted demand arising from the China-Pakistan Economic Corridor program of development projects backed by the Chinese government. A VW manufacturing presence also would be among the latest results of the business-friendly policies pursued by Prime Minister Nawaz Sharif.

The Amarok is a direct competitor to Toyota’s HiLux Revo and the T6 is a multipassenger van.

Wilhlem Kramer, a spokesperson for Volkswagen Commercial Vehicles, says no firm decisions have yet been made about an investment in Pakistan, saying only, “A global corporation such as Volkswagen continuously explores market potential – including in South Asia.”

Federal Commerce Minister Khurram Dastgir Khan confirms to WardsAuto that VW “is in talks with government of Pakistan to launch its passenger/commercial plants in Pakistan,” although he doesn’t comment on the status of the negotiations.

Another possible motive for VW to enter Pakistan is the scheduled July launch of refineries able to produce high-quality diesel fuel.

The fuel will be produced with a sulphur limit of 500 parts per million and lower sulphate particulate emissions, meeting the country’s air-quality standards for heavy-duty highway engines. Oil-marketing companies already are importing high-quality diesel.

German automakers sold 3.54 million vehicles in Pakistan, Malaysia, Philippines, Taiwan, Thailand, Singapore and Vietnam in 2015, the most recent year for which figures were available from the VDA, the automakers’ industry association. Sales in India, where VW operates an assembly plant, totaled 3.4 million.

Volkswagen and Audi vehicle manufacturing would be a huge boost to Pakistan, given its low levels of foreign direct investment and falling exports. Experts say greater investment could counteract Pakistan’s economic weaknesses, such as a widening trade deficit.

Other automakers considering production in Pakistan include Hyundai, which may form a joint venture with textiles manufacturer Nishat Mills; Kia, which may partner with Lucky Cement, one of the country’s largest cement makers; and Renault, which is in talks with India’s Ghandhara Nissan Motors to use its Karachi plant for car assembly.

–with Barbara Bierach, in Friedrichshafen, Germany