A Chinese investment bank just entered the tire-manufacturing sector, along with local companies and the project is worth almost $600 million. The Sino-Pak joint Tire Manufacturing Joint Venture includes three companies, namely the MSD Tire and Rubber Company (Local), Daewoo Express (local) and the Chinese InvestTarget investment bank, which is also the largest investor in the consortium.
The company is planning initially to enter the bus and truck tire sector, as they are not locally produced in Pakistan. The company would aim to produce around 2-3 million tires for heavy vehicles and around 3-4 million for the passenger cars.
Dr Xu Peng managing director of InvestTarget said that, “We will start with the trucks and buses segment because nobody is producing these tires in Pakistan and their demand is growing.” He added that with Daewoo as their local partner, there should be no difficulty in finding their first customer.
The director refused to provide details of the financials and said that they are being kept confidential at the moment. However, he said that the debt to equity ratio would be around 70-30. Dr Xu added that, real returns would be attractive as there is no local truck tire manufacturer, and for the passenger tires, we would aim for the higher end radial tires which are mostly imported into Pakistan.”
Dr Xu further added that the location of the factory is still being decided from the export viewpoint. He added that there is an economic zone in Gawadar along with a seaport but Karachi has a developed infrastructure and offers more connectivity with the local markets. He added that the location would be decided soon, considering all the factors.
DrXu said that he is expecting half of the production to be exported and half the production to be supplied in the local markets through well placed local partners, such as Daewoo and the MSD Tire and Rubber Company.
Dr Xu further added that, “We have looked at the numbers carefully, and have local partners who know the market well. The cost of doing business would not be as low as in China but the location advantage of being in Pakistan will help reduce transportation cost.”
The signing ceremony took place at the PM office and the PM himself along with other senior government officials were present at the occasion.