July-April of FY2021: Automotive sector posts robust growth as car sales rise by 48pc

ISLAMABAD: The country’s automotive sector has posted robust growth with car sales rising by 48 percent to 126,679 units in the first 10 months (July-April) of fiscal year 2021 compared to 85,330 units during the same period of last year, which would help fuel economic activity, tax collections, and employment levels but also increase pressure on imports.

This was the consensus among sector experts while talking to Business Recorder, here on Tuesday.

The Pakistan Automotive Manufacturers Association (PAMA) has released car sales data for April 2021, showing that passenger car sales in April were 14,435 while there were no sales in April last year due to lockdown. However, April 2021 sales were down 16 percent over March 2021 at 17,105 units. Vehicle sales have gone down due to certain hiccups in the supply chain for all car companies as well as due to Ramadan but despite the slump in operations and the high prices of vehicles, the auto sector has done well in terms of sales during the current financial year, experts acknowledged.

Samiullah Tariq, a sector expert told Business Recorder that lower interest rate leading to increased auto financing, stable currency parity and higher prices for imported cars are the major reasons for increase in sales of auto manufacturers. The automotive industry’s growth reflects an overall uptick in domestic economic activity after Covid-19 lockdown restrictions were lifted. The sector growth would help fuel Large Scale Manufacturing (LSM) and GDP growth, higher tax collections and employment opportunities. However, the increase in car sales would raise imports and lead to more traffic congestion, Tariq added.

Abdul Waheed, Director General PAMA said that due to restrictions on account of Covid-19 last year, auto sector production and activities were at a standstill however with easing of restrictions and a reduction in interest rates supply and demand have improved however he added that there is still room for a further reduction in interest rates which would help in further uptick in the sector.

The auto sector has urged the government to cut duties on raw materials and parts in the next budget with the objective of reducing the price of locally manufactured and assembled vehicles.

Waheed said that in the budget proposals forwarded to relevant ministries, PAMA has proposed a change in the tax structure on raw materials and parts to bring down the cost of vehicles and further contended that car manufacturers were no longer able to absorb the unprecedented surge in raw material prices globally.

According to PAMA most automobiles are composed of 57 percent steel, 7 percent iron, 8 percent plastic and 8 percent aluminum while other materials accounted for the remaining 20 percent.

“Prices of all these materials are constantly rising and it has become really difficult for automakers all over the world to absorb the impact. Hence, car makers are forced to increase the prices of manufactured cars,” Waheed added.

Keeping in view the rising prices of raw material, the auto industry has suggested to the government to revisit SRO 1178 (I) 2015 which refers to Additional Custom Duty levied on various items including raw materials at 1 percent that was enhanced to two percent vide SRO 630 (I)/2018.

Copyright Business Recorder, 2021