Despite better sales, auto sector faces uphill battle

Lower interest rates fail to give boost to demand for cars

KARACHI:

Pakistan's car sales rose to 27,585 units in the first quarter of current financial year, marking a 31% increase as compared to sales of 20,982 units in the corresponding period of last year.

However, the auto industry is still struggling, as data reported by the Pakistan Automotive Manufacturers Association (PAMA) is not satisfactory. Auto sector analyst Mashood Khan noted that the situation is alarming for the auto industry, which stands on four pillars – trucks and buses, tractors, motorcycles, and passenger cars.

Tractor sales, in particular, have been dramatically falling since the federal budget announcement in June, as the government imposed sales tax on them. This has led to significant losses for the Original Equipment Manufacturers (OEMs) producing small tractor parts, putting their survival at risk.

As Pakistan is an agricultural economy, the government has introduced farmer-friendly policies to promote the sector.

Unfortunately, the tractor industry, which could play a key role, is facing a tough time. The government must take immediate steps to revive this struggling sector, he said.

In the case of trucks and buses, despite the construction of highways and motorways, sales volume is still not at a satisfactory level.

The motorcycle industry, on the other hand, is rebounding, showing a promising growth as it remains a popular choice among the middle class. The car industry is also facing challenges with no optimism seen for 2025. Although the State Bank of Pakistan (SBP) has lowered policy rate, it has not led to a significant surge in car sales. Further reductions in interest rates are needed. The car industry will not gain momentum until interest rates drop to single digits.

While PAMA data shows an improvement compared to last year, it is not particularly encouraging. The industry is grappling with political instability, economic challenges, and recession.

Until other allied industries like textile, leather, and pharmaceuticals grow, the auto industry will continue to face difficulties.

According to PAMA, sales of trucks and buses increased by 74.7% to 772 units, and 60.4% to 154 units, respectively. Jeep and pickup sales rose by 51.5% to 7,517 units.

Meanwhile, sales of two- and three-wheelers (motorbikes and rickshaws) surged by 19%, reaching 320,187 units.

However, farm tractor sales fell again by 56.9%, with 5,206 units sold, as farmers struggled to purchase new tractors due to poor agricultural yields, worsened by climate change.