Pak-China JV tyre plant to start production this month
by Fatima Javed
ISLAMABAD, June 2(Gwadar Pro)—Pakistan-China joint venture tyre plant is ready to start its production this month(June), according to sources. The joint venture aims to reduce the expense while exporting a majority of the merchandise. It plans to export at least 85% of its tyre output.
Earlier, Service Global Footwear Limited (SGFL) - a leading exporter of footwear in Pakistan started a joint venture with a Chinese firm Chaoyang Long March Tyre Co. Ltd, to establish a tyre manufacturing plant for buses and trucks in Pakistan.
The total cost of the project is estimated to be Rs16.43 billion. The project is being financed through 50% debt and 50% equity with installed production capacity of 600,000 tyres per annum.
The new production facility was established in Pakistan at a time when the US and European Union (EU) imposed anti-dumping and countervailing duties on tyres made in China.
The development may help the joint venture win export orders from Western markets as the grant of tax exemptions to the company will keep its cost of production comparatively low.
Arif Saeed, CEO of Service Industries Ltd., and Li Qingwen, Chairman of Chinese Chaoyang Long March Tyre Co. Ltd signed a Joint Venture Agreement in November 2019.
The scheme is in line with the government’s key target of attracting new investment in export projects to improve the country’s international payment capacity and to build foreign currency reserves.
Currently, the Chinese tyres have recorded to capture 85 percent of Pakistan’s market share, a substantial 45% increase from two years ago.
In the light truck category tyres, China held a share of 30-40% two years ago which has now up to 65-70%. Similarly, China also dominates the truck/bus tyre market with over 75% market share, which was 40% two years back.
Former chairman of the Pakistan Tyre Importers and Dealers Association (PTIDA), Azim K. Yousufzai said, “Mushroom growth has been noted in the number of dealers who are regularly flooding the market with Chinese tyres.”
On the other hand, Pakistan rubber tyre market attained a value of around USD 415 million in 2020. The market is further expected to grow in the forecast period of 2021-2026 at a Compound Annual Growth Rate of almost 24% to reach USD 1510 million by 2026.
Establishment of tyre manufacturing plants at this time will be particularly beneficial as Pakistan is eagerly awaiting the benefits of relocating the Chinese industry to Pakistan in the second phase of industrialization under CPEC, which will help increase exports.