Identifying productivity blemishes in Pakistan automotive industry: a case study

Purpose - The purpose of this research is to identify the prevalent condition of productivity in the automotive manufacturing industry of Pakistan and to indicate the possible areas for enhancing productivity. Design/methodology/approach - Secondary data for the last ten years were gathered. Total productivity and all partial productivities were computed using methodology proposed by Sumanth, and total factor productivity (TFP) was computed using Cobb‐Douglas production function. Regression analysis and Pearson correlations were run to determine labor elasticity and capital elasticity. Findings - Results indicated very low levels of labor productivity and capital productivity, resulting in huge losses and stagnant growth of these firms. Increasing returns to scales (IRTS) with high values of labor elasticity and low and even negative value of capital elasticity were computed. Low values of TFP showed minimal utilization of technology in these firms. Research limitations/implications - One of the limitations of this research is that only two automotive manufacturing companies of Pakistan i.e. Honda Atlas and Indus Motors were targeted, which limits the generalizability of findings. Practical implications - Findings of this research revealed that effective utilization of technology can enhance the productivity of Pakistani manufacturing firms significantly. IRTS with high values of labor elasticity and low value of capital elasticity depict the areas of productivity enhancement. Originality/value - In Pakistan not enough effort has been put into measuring the productivity of manufacturing industry. The contribution of this paper is that it indicates the productivity blemishes in this industry and also the areas of focus for productivity enhancement.