PAMA highlights reasons behind decline in vehicles' output

The country's dwindling economy, devaluation of rupee, application of increase in interest rate and fear factor of tax notices are said to be the key factors behind nose diving cars and other vehicles' production.

This was observed from data of Pakistan Automotive Manufactures Association (PAMA) and background interviews with the car assemblers and other auto sector experts.

According to the data released by Pakistan Bureau of Statistics (PBS) production of automobiles has declined by 3.02 per cent during the first four months of the current fiscal year (July-October) as compared to same period last year.

However, according to PAMA's cumulative production data of vehicles during the first five months July-November 2019-20, there was a decline of over 190 per cent due to different reasons. The data shows that production in July 2019 recorded 16,472, followed by 10,636 in August and 9,090 in September. In October production slightly increased to 9,547 and dropped to 6,744 in November.

Production of cars has dropped by about 180 percent from 87,897 during the first five months of 2018-19 to 49,110 in the current fiscal year. Data further shows that production of Honda (civic and city) decreased to 11921 units during the five first months as compared to 39,889 units during corresponding period last year. Total production of Suzuki Swift decreased to 1618 from 4477 units while Toyota's production was recorded at 19747 units from 47890 units during the first five months of 2019-20 compared to the same period the year before.

This indicates that production of cars of 1300 cc and above has nosedived from 92256 units to 33285 units which is about 277 per cent reduction.

The production of Suzuki Cultus, Suzuki WagonR has declined to 21209 units from 47277 units. Likewise, the production of Suzuki Mehran which is not manufactured now and Suzuki Bolan has also declined substantially. The production of Trucks of Hino, Nissan, Master and Isuzu reduced to 2902 units from 6219 units while production of these companies dropped to 583 units from 818 units. The total production of trucks and buses recorded 3485 units from 7037 units.

The data further indicates that production of LCVs, Vans, jeeps and motorcycles has also declined massively. "Massive currency devaluation, Federal Excise Duty, Additional Customs Duty (ACD), documentation of economy, recession in global markets, higher and increased rates of on leasing, overall inflation and unfavourable government policies are some of the factors behind this mess in the auto sector," said one of the auto sector stakeholders.

Another stakeholder said that in addition to taxes and duties, fear factor of tax notices for source of income was also hitting auto sales. An analyst of auto sector stated that increase in interest rate which has dried up leasing while a drop in overall economic activity due to which buying power sector has gone down drastically are additional factors that have reduced demand.

"Documentation drive of the government has made people apprehensive to buy over 1000 cc vehicles as they must be filers otherwise they will receive FBR notice," he continued. In reply to a question, he said in his estimation, more than 10,000 jobs have already been lost in vendor industry.

Another view was that prices have gone up a lot in a very short time, and are at present beyond the purchasing power of customers. Officials in EDB noted that 18 companies in Greenfield and Brownfield have got production licences with a combined investment of about $ 1.2 billion in Pakistan but if the current situation continues few will survive.