It has been a pretty tough ride for the domestic automakers in the past year and a half and the road ahead does not seem to be too smooth either. The uncontrollable factors have taken the toll on the auto industry in the past two years as the costs have increased manifolds simultaneously with a sharp decline in the automobile demand.
The auto industry in such tough times has shown strong resilience as car sales volumes have surged by a good 28 percent during the first half of FY10, but it owes a large thanks to the low base effect of the previous year. Reaching the high levels of the golden period of FY07, however, seems optimistic and a distant dream.
The most daunting task on hands for the automakers is that of controlling the costs which unfortunately does not seem to be in their control. The rupee had depreciated sharply against both the greenback and yen by 27 percent and 45 percent respectively, since June 2008.
The massive dent in the currency value has compelled the car manufacturers to increase the unit prices a number of times during the period - which naturally leads to a slowdown in demand.
To make matters worse for the automobile industry, the sole tyre manufacturer General Tyre and Rubber Company of Pakistan is facing a complete production shutdown as the workers are observing a strike.
"We work on a single day stock and we cannot stop our operations even if our tyre supplier goes on a strike. And to keep the plant running, we will seek governments help to allow us to import so that we are able to absorb the additional cost. But if we are not allowed to import, we will close down, till the time that one supplier comes up, these are some of the challenges that the industry faces every day", said Raza Ansari, Director Marketing & Corporate Planning, Indus Motor Company, in an interview with BR Research.
He also highlighted some other issues that the auto industry is facing. The genuine importers and local manufacturers are finding it difficult to compete against under-invoiced products selling in the market as they pay lower duties to the government. Moreover, he stressed the need to discourage imports of used cars in order to help develop the local auto industry.
Despites all these difficulties, the industry has not lost all hopes as he strongly believes that the market size will grow by 26 percent in this fiscal year to 138,000 units from 110,000 units last year.
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