Booming car sales

Our insatiable appetite for cars is driving a high-octane boom in car sales. Whether it is a locally assembled vehicle, a light commercial motor car, a van or jeep, buyer interest remains strong as shown by a 23 per cent year-on-year growth recorded by the Pakistan Automotive Manufacturers Association (Pama) for the month of February. Even a revision in prices in the same period has not deterred Pakistani buyers in the least. This in part may be due to the season — auto sales are usually brisker in the first quarter than at any other time. Market analysts, however, cite a myriad of contributing factors such as changes in the import procedure, greater demand from online ride-hailing services and lower rates for auto finance. The government, it must be remembered, has modified the procedure for the payment of duties and taxes in an effort to curb imports of used vehicles.

Despite higher sales, local automakers have consistently failed to satisfy the demands of the market whose needs have grown increasingly sophisticated with time. Since buyers are now looking for improved technology as well as fresher and fancier gadgets fitted into vehicles — the kind unlikely to be found in locally-assembled vehicles — they often turn to used cars which are also older and hence cheaper. In the first instance this is what led to the influx of used cars in the country over the past few years notwithstanding the overall impact of higher imports. The pressure building on the current account would thus be unbearable. In the battle between new (and locally made) and used (imported) varieties, local manufacturers have simply not evolved well enough to justify years of protection and chances for investment. An increase in production will increase tax revenue and lead to the creation of jobs. Automakers can do that if they invest in capacity expansion and take steps to improve their own efficiency. 

Published in The Express Tribune, March 14^th, 2018.

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