Falling auto sales

Allegations of collusion and uncompetitive practices to keep prices high are rampant

Car sales have continued to decline in the new fiscal year, with a 39% overall reduction seen in the first quarter of the current fiscal year. Some manufacturers have already begun cutting costs by reducing the number of working days at their plants, and reports suggest that Honda Atlas will observe between 16 and 18 non-production days (NPD) in October. Also, in a country like Pakistan, where people had to wait for months on end for their cars to be delivered, Honda still has over 2,000 cars ready to be driven off the lots, according to reports. Production at Indus Motor Company plants — most notably Toyota cars — has also been at less than 50 per cent of capacity, with around 15 NPDs added to the mix. Pak Suzuki has avoided NPDs thus far despite sales of some car models crashing by as much as 73% in the first quarter. The Alto has been singlehandedly keeping sales alive, despite prices for the base models jumping past Rs1.3 million.

Automakers and vendors have been quick to blame external factors such as inflation, taxes and fall in investors’ interest after the FBR began looking closely into those who may be using the car market to whiten the black money or those who are otherwise living with assets beyond known means of income. Duties on car parts and the increasing cost of car financing due to high-interest rates have also been blamed, but carmakers are quick to deflect when the subject of indigenisation comes up. Indigenisation — domestic manufacturing of car parts — remains low, and carmakers have repeatedly worked to avoid increasing it, leading to high prices as compared to those in regional markets. Allegations of collusion and uncompetitive practices to keep prices high are also rampant. Entry-level cars in India cost less than half of what equivalent vehicles do in Pakistan, thanks to competition and indigenisation. Failure to lower production costs is what is now hitting the carmakers’ bottom lines the hardest. 

Published in The Express Tribune, October 15^th, 2019.

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