After an era of conflict and social instability, Khayam Husain’s verdict on the state of Pakistan’s trailing equipment industry is as equivocal as the nation’s economy at large.
According to the CEO of the country’s largest certified trailer building company, Autocom, “some businesses have moved to the next evolutionary stage, which is a positive sign. But we still face a market that is vastly underdeveloped, price driven and often blatantly unsafe.”
Just as the industrial hub of Karachi – a teeming port city of nearly 12 million residents and home to the Autocom organisation – outpaced the less developed rest of the country, a handful of sophisticated trailer manufacturing businesses share the market with a vast and unorganised competition operating illicitly from the side of the road.
Helming one of the few locally owned businesses that have overcome the vastly unorganised state many an emerging economy entered when first opening up to the global marketplace; Khayam Husain has a rare insider’s view on the country’s transport equipment market. His judgement is known to be precise and urbane – a rare quality in the crisis-shaken country.
For example, Husain does not hide the fact that the 180-million people nation still has a long way to go to achieve global competitiveness. While his own company, Autocom, has made the leap to a new era of manufacturing and is now aiming at regional hegemony, some 80 per cent of the market are still held by “Ustaads” – uncertified roadside fabricators using scrap steel and used running gear to build semi-trailers of every shape and size.
“They are what we pigeonhole as mom-and-pop shops,” he says. “They have not undergone any formal training or hold a professional degree, yet it’s fair to say they have acquired pretty decent skills on the job. To compete on the next level, though, we needed to leave that stage behind us.”
In a country where eight out of 10 articulated trailers are still being built in a roadside shed, the Husain family has formed Autocom into a poster child of economic adaptability, adapting to the country’s complex political situation and fighting a wealth of negativity along the way.
Even half a decade after the world financial system imploded due to the collapse of US bank Lehman Brothers, Pakistan’s economy has not fully recovered from the aftermath of the global crisis, for instance. South Asia’s second largest economy is currently experiencing the sixth consecutive year of recession, making for the longest lasting slowdown in modern history.
On top of the internal turmoil, a 2013 poll for the BBC World Service* showed Pakistan is still conceived as one of the most unpopular countries in the world, weighing down local business sentiment and the global perception of Pakistani made equipment.
“As a local trailer builder, we still face tremendous challenges in the region,” says Husain. “Although 96 per cent of all freight in Pakistan is moved by road, our infrastructure is too weak to cope with it all; and the current political tumult doesn’t contribute to solving the problem. Lobbying and external influences are also still strong and we are still trying to find the right recipe for growth.”
Despite that hostile business environment, Autocom is in a position that is as close to ‘backyard building’ as Karachi to Kabul – also because it benefitted from the increased demand for local transport services when US and NATO troops came to Afghanistan. However, the boom stopped when Pakistan suspended the NATO supply route over an errant US airstrike that killed 24 of its soldiers in late 2011. Luckily, Autocom was strong enough to absorb the shock.
“A customer once described us as a first-class company in a third-class environment, and I take that as a compliment,” says Husain, who has grown Autocom’s share in the ‘organised’ sector of the market to around 80 per cent.
Taking the country’s immense underground economy into account, it would be somewhere around 10 per cent, but Husain does not acknowledge it as viable segment of the market – even though common buying behaviour may play into the Ustaads hands.
“Unfortunately, we face a strong resistance in the market as people still base buying decisions on the initial purchase price instead of total return on investment. While it does mean we have to educate our clientele more comprehensively, it’s probably a good thing for the economy as a whole,” he explains, revealing a deep commitment to the Pakistani community that has been Autocom’s second nature ever since the company’s inception.
Khayam’s father Mutahir Husain founded the family business in 1968 as a 3S facility on behalf of Fiat’s car division, covering sales, service and spare part distribution in West Pakistan. “He had a vision of bringing quality European cars into Pakistan. However, the car industry was soon nationalised and ownership of the business got transferred to the Government,” Khayam recalls.
“That’s when he decided to get into the heavy vehicle business. Because of his affinity for Italian technology, he was introduced to Cometto, Italy’s leading semi-trailer brand at the time, which was located in close proximity to Fiat in Cuneo. So, he started importing articulated trailers instead.”
After gaining experience in the less regulated trailing equipment market, Autocom’s move into vehicle production was finally triggered by the 1982-83 famine in Pakistan. “Millions of tonnes of wheat were imported under US grant and had to be transported by road. To handle the enormous freight task, the Government set up a logistic company called National Logistic Cell (NLC) under the military council. We introduced the concept of the semi-trailer to them and soon received an order to build 300 units to deliver the wheat across the country.”
Today, 150 staff produce some 300 units per year, generating a turnover “in the $10-15 million region”. Raw materials like steel are still sourced locally from Pakistan Steel Mill, while running gear and ancillary equipment are imported.
In 1998, Autocom decided to fit a Fuwa axle and mechanical suspension system as standard to make for the best possible ride on Pakistan’s rough road network, alongside the occasional BPW and SAF-Holland fitment. In 2005, the company even introduced ABS as standard for all dangerous goods trailers, a novelty in the region. Also, the family company still represents Italian brand Cometto in Pakistan, as well as fellow Italian company Sampi and US tanker specialist Heil International.
“Co-operating with such a variety of international partners is extremely important for our development as an organisation,” says Husain. “The on-going exchange of thoughts is vital to move into the premium space where we now see us.”
According to Husain, it is that willingness to reach out for international expertise that has boosted Autocom’s global standing over the past decade or so, and multi-national corporations like DHL, Shell, Total, and Agility helped it push the industry benchmark on the client-side of the equation.
“I like to believe that due to our commitment to global quality and safety standards, we helped improve Pakistan’s transport industry as a whole, but we haven’t seen the tipping point as yet,” he adds, pointing out that the company’s most efficient post-GFC strategy was and still is product differentiation.
“Our portfolio is continuously revamped based on the requirements of our clientele and our efforts to continuously add value to it,” he says. “We mainly cater to the high-end segment of the Pakistani market, where performance and tare weight are critical. It is a tough selling point in a market where the majority of people still consider pricing to be top priority and like to negotiate on the upfront cost, but we need to stick to our strategy to survive.”
As a result, Autocom’s own portfolio has just been bolstered by a high-tech carbon steel petroleum tanker model with lightweight aluminium attachments; and a new waste management line is in the making too. “We are currently developing a new range to cart compacted waste to landfill sites in a more efficient way,” says Husain. “Another key growth segment is mining. Here, we want to use Australian technology and adapt it for coal mining applications.”
Despite technological advancement and international collaboration on almost every level, Khayam Husain is still a strong advocate of local manufacturing, training and tutoring. “I strongly believe that our employees are our greatest assets and differentiator, so we systematically focus on capacity-building and nurturing home-grown talent,” he says. “There is a culture of ownership in the business that some larger companies have lost. Be it frontline staff or MD, people here take personal ownership and that’s what differentiates us from a mediocre company. Our people’s passion to excel and commitment to work are the key factors that drive our business,” he says.
Standing in the tradition of the company as a connecting link between European capital and local market know how, Husain is convinced there is no contradiction in being open to the world and the technical opportunities available, and supporting local manufacturing. In fact, it is considered a necessity for an emerging economy surrounded by the mighty BRIC ensemble.
“We can definitely learn from the BRIC example in more than one way,” he says. “Most importantly, they teach us how big the potential to expand and grow really is. As a nation, we currently manufacture some 3000-4000 commercial vehicles per year, but if we apply the same population-to-market ratio than India, there should be a potential market size of 50,000 annually.”