FUTURE

Bleak Future for the car industry in Pakistan

2023-02-20
Bleak Future for the car industry in Pakistan

A 40 percent decline in sales of cars, SUVs, pickup trucks, and jeeps in 7MFY23 to 94,296 units has led stakeholders in the auto industry to think that the next five to six months will be more difficult than the previous seven.



Due to the State Bank's (SBP) restrictions on obtaining new letters of credit (LCs), the industry continues to experience a shortage of parts, which causes factory closures and extended vehicle delivery periods. Nonetheless, despite factory closures, shaky economic conditions, and declining sales, industry players continued their historical habit of raising prices. To reduce overhead costs, some assemblers even implemented repeated price shocks in less than a month.

 


Consumers are paying more for imported parts as a result of the rupee's declining value against the dollar, but no one is concerned about lowering prices for consumers now that the rupee is strengthening against the dollar. In the interbank market, one dollar was worth Rs 264.38 on February 16 as opposed to Rs 276.58 on February 3.



Yet, auto assemblers closing their operations had led to the loss of between 250,000 and 300,000 direct and indirect jobs in the auto vending sector at a time when food inflation and electricity costs were skyrocketing. Throughout the previous six to seven months, Pak Suzuki had its facility closed for a total of 40 days.



"It is difficult to estimate future sales scenario as things are not obvious about the opening of fresh LCs for parts and accessories," stated Ali Asghar Jamali, CEO of Indus Motor Company (IMC). We are unaware of what is happening.



According to him, "our company has not offloaded any of the employees, not even drivers and low-salaried people," despite a 50% decline in production and regular plant shutdowns. In total, IMC shuttered their operations for 53 days between August 2022 and February 2023. IMC's sales decreased by 51% to 21,877 units in 7MFY23.

 

 "Considering the current situation, I believe overall auto sales in FY23 will decline by at least 50%," he continued.