Decline in imports not enough to rev up auto sector
Production and sale of cars has declined by nearly 40% due to rising interest rate, rupee depreciation
PHOTO: REUTERS
LAHORE:
Not even a decline in imports of vehicle and auto parts is enough to change the fortunes of local automakers, it seems. Sales of locally made cars and parts have continued to decline despite soaring import costs, highlighting how hard the rupee’s decline against the dollar has hit the purchasing power of Pakistanis.
The production and sale of 800cc cars and above have declined by nearly 40% during the first three months of the current fiscal year compared to the same period of the previous year, a report compiled by the Pakistan Automotive Manufacturers Association (PAMA) has revealed. Auto manufacturers built 36,198 cars and sold 31,017 in the first three months of 2019-20 as opposed to the 58,188 built and 51,221 sold in the same period of 2018-19.
With banks charging a 17% mark-up on loan and the massive rupee depreciation (49% since December 2017), the cost of all cars between 800cc and 1,300cc has increased by Rs300,000 to Rs500,000, prompting concerns that production and sales may see a further decrease in the coming months.
However, dwindling customer interest in automobiles is not the only headache for auto manufacturers. Other vehicles appear to be suffering a similar decline in production and sales. According to the report, 370,771 motorcycles were produced and 367,656 were sold in the first three months of 2019-20. In contrast, 456,521 motorcycles were produced and 456,626 were sold in the first three months of 2018-19.
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Similarly, 867 four-wheel-drive vehicles were built and 794 were sold in the first three months of 2019-20 as opposed to the 2,147 built and 1,899 sold in the same period of 2018-19. The number of pickup trucks built and sold in 2019-20 was 5,494 and 2,824 respectively, a significant decline from the 7,017 built and 5,436 sold in the previous fiscal.
Interest in heavy vehicles also seems to have waned as only 799 trucks were produced and 874 were sold between July to September this year as opposed to the 2,049 built and 1,738 sold in the same period of last year. Buses, too, suffered a hit with only 157 built and 196 sold in the first quarter of the ongoing fiscal year compared to the 281 produced and 267 sold during the same period of the previous year.
Speaking to The Express Tribune, Lahore Car Dealers Federation President Shahzad Saleem blamed the government’s move to increase excise duty for the slowdown in vehicle sales. “The increase has cost us as much as 40% of our business. The foreign companies that wanted to invest in Pakistan are no longer interested due to such policies,” he complained.
Saleem asserted that the government did not receive the right advice from its advisers and claimed that stakeholders were not taken into confidence before it formed the policy. “Not only has it left thousands unemployed, it has decreased revenue generation,” he said.
He added that auto sector representatives are planning another protest in November after the government failed to change the policy after the previous one they carried out.
Published in The Express Tribune, November 3rd, 2019.
Not even a decline in imports of vehicle and auto parts is enough to change the fortunes of local automakers, it seems. Sales of locally made cars and parts have continued to decline despite soaring import costs, highlighting how hard the rupee’s decline against the dollar has hit the purchasing power of Pakistanis.
The production and sale of 800cc cars and above have declined by nearly 40% during the first three months of the current fiscal year compared to the same period of the previous year, a report compiled by the Pakistan Automotive Manufacturers Association (PAMA) has revealed. Auto manufacturers built 36,198 cars and sold 31,017 in the first three months of 2019-20 as opposed to the 58,188 built and 51,221 sold in the same period of 2018-19.
With banks charging a 17% mark-up on loan and the massive rupee depreciation (49% since December 2017), the cost of all cars between 800cc and 1,300cc has increased by Rs300,000 to Rs500,000, prompting concerns that production and sales may see a further decrease in the coming months.
However, dwindling customer interest in automobiles is not the only headache for auto manufacturers. Other vehicles appear to be suffering a similar decline in production and sales. According to the report, 370,771 motorcycles were produced and 367,656 were sold in the first three months of 2019-20. In contrast, 456,521 motorcycles were produced and 456,626 were sold in the first three months of 2018-19.
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Similarly, 867 four-wheel-drive vehicles were built and 794 were sold in the first three months of 2019-20 as opposed to the 2,147 built and 1,899 sold in the same period of 2018-19. The number of pickup trucks built and sold in 2019-20 was 5,494 and 2,824 respectively, a significant decline from the 7,017 built and 5,436 sold in the previous fiscal.
Interest in heavy vehicles also seems to have waned as only 799 trucks were produced and 874 were sold between July to September this year as opposed to the 2,049 built and 1,738 sold in the same period of last year. Buses, too, suffered a hit with only 157 built and 196 sold in the first quarter of the ongoing fiscal year compared to the 281 produced and 267 sold during the same period of the previous year.
Speaking to The Express Tribune, Lahore Car Dealers Federation President Shahzad Saleem blamed the government’s move to increase excise duty for the slowdown in vehicle sales. “The increase has cost us as much as 40% of our business. The foreign companies that wanted to invest in Pakistan are no longer interested due to such policies,” he complained.
Saleem asserted that the government did not receive the right advice from its advisers and claimed that stakeholders were not taken into confidence before it formed the policy. “Not only has it left thousands unemployed, it has decreased revenue generation,” he said.
He added that auto sector representatives are planning another protest in November after the government failed to change the policy after the previous one they carried out.
Published in The Express Tribune, November 3rd, 2019.