Car ownership drops to 11 per 1,000

Despite a surge of new entrants in Pakistan's automobile sector, car ownership in proportion to the population has fallen sharply, underscoring the country's deep structural challenges.

The number of people owning a car per 1,000 residents, already abysmally low at 18, has now declined to just 11, revealed Indus Motor Company (IMC) CEO Ali Asghar Jamali, who openly expressed a lack of confidence in policy consistency, describing it as a critical prerequisite for sustainable sectoral growth, notwithstanding the apparent calm on the surface of the economic pond.

Speaking to The Express Tribune in a wide-ranging discussion on the state of Pakistan's automobile industry, Jamali argued that beneath the calm, deep-rooted issues of affordability, weak income growth, volatile policies and distorted taxation continue to choke demand, keeping Pakistan among the lowest car-ownership countries in the region.

"Give me a consistent policy, whatever policy you want to make, so businessmen can plan their investment," said Jamali.

Although he was optimistic that the market will surpass the 275,000 mark in total production this year, he believes it will soon reach the record high of around 350,000 set in 2021. This positive outlook is driven by increased activity due to a surge in remittances and other macroeconomic improvements.

He avoided providing specific details, but mentioned that his company plans to unveil two to three new models in the near future. They are also in discussions with their investors for a few million dollars in funding for the localisation of the recent models they have introduced.

Regarding the low level of ownership of the mammoth population in the country, he stated that without income growth and consistent policies, investors will remain cautious. He added that frequent policy changes have historically undermined long-term planning in the sector. "Automobile investments are made for decades, not for two or three years."

On affordability, he said, "what matters is per capita income in the success of the auto sector of any country." Pakistan's per capita income, currently hovering around $1,700, is far below the threshold required to trigger sustained growth in automobile ownership.

According to Jamali, international experience shows that automobile markets begin to expand meaningfully once per capita income crosses $3,000. "This is not a theory; it is an observed pattern. Below that level, affordability simply does not exist," he said, adding that population size alone cannot compensate for the weak purchasing power. "You can have 250 million people, but without income growth, you cannot build a mass market."

Drawing comparisons with regional peers, Jamali pointed to India, where per capita income has reached around $2,700 and annual car sales already exceed four million units. "The moment India crosses the $3,000 mark, it will become one of the world's largest auto markets. That growth is income-led, not currency-led," he noted. In contrast, Pakistan's total auto volumes remain too small to support economies of scale.

He explained that automobile manufacturing is an extremely capital-intensive industry, where costs decline sharply only when investments are amortised over large volumes. "If one company invests $100 million and spreads it over 50,000 units, and another spreads the same investment over one million units, the cost difference is obvious," Jamali said. India's advantage, he added, lies not only in scale but also in the availability of raw materials and a deep vendor base, which naturally lowers prices over time.

Responding to frequent comparisons of car prices between Pakistan and India, Jamali said such comparisons are often misleading. "In the case of Toyota, if you strip out taxes, prices are not very far apart," he said, noting that Toyota remains an upper-segment brand in both markets, while mass affordability in India is driven primarily by high-volume players such as Maruti Suzuki and Hyundai.

Jamali also shed light on consumer behaviour across different price brackets in Pakistan, describing it as sharply segmented. "Below Rs5 million, buyers are extremely price-sensitive. A change of Rs200,000 to Rs500,000 can shift demand overnight," he said. However, in higher segments, the behaviour changes dramatically. "Between Rs5 million and Rs10 million, sensitivity reduces, and above Rs20 million, price becomes almost irrelevant. Consumers will absorb even large increases if they want the product."

This, he said, explains why many new entrants and models have targeted upper segments rather than the mass market. "It's not because volumes are higher there; volumes are actually lower. But pricing power exists because buyers are less sensitive," he said. At the same time, he warned that this strategy cannot create a broad-based industry. "No auto market can stand on premium segments alone. The foundation has to be the lower end."

Addressing criticism that local assemblers do not invest enough in innovation, Jamali said Pakistan's role within global automotive value chains is fundamentally different. "Design and core technology are developed by global principals with R&D budgets running into tens of billions of dollars annually," he said. Local companies, he added, contribute through localisation, job creation, vendor development and implementation of global technologies.

He highlighted the sector's role in human development, noting that beyond direct jobs, thousands more are supported across dealerships, vendors and the transport sector. "Our biggest contribution is building industrial capacity and human capital," he said, adding that Pakistani auto-sector professionals are increasingly finding opportunities abroad, particularly in the Gulf.