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Major automobile assemblers in Pakis-tan such as Indus Motors are operating at half of their existing production capacity. Resulting volumes have followed suit. In 4QFY23, volumes across passenger cars, LCVs and SUVs dropped 47 percent after companies kept plants closed for days at end due to unavailability of completely knocked down (CKD) kits. The shortage of these inputs is a direct result of government restrictions where limits have been set on assemblers to import desirable quantities of CKDs.

The low inventory levels have certainly affected supply but volatility of exchange rate has not helped matters either. Companies are stalling new car bookings fearing their inability to source the necessary inputs in enough quantities and at a cost that they can bear. All fingers also point toward a demand slowdown. Back-breaking inflation and higher tax incidence has adversely affected the buying power of consumers while elevated interest rates have substantially raised cost of borrowing with government-imposed additional restrictions obstructing consumers to attain bank financing for car loans. Meanwhile, recent floods are sure to impact rural and cash-based demand. But unfortunately, due to the supply restrictions, whether volumes have dropped due to demand suppression is not apparent yet. What is apparent however is that volumes will remain at their current growth levels until supply constraints ease.

On a sequential month on month basis, October recorded improved sales compared to the previous month due to higher deliveries made on pending bookings. However, the Oct dent is not enough to bring up volumes for the year thus far. Data reported by Pakistan Bureau of Statistics (PBS) shows that imports under the motor vehicles head are delivering on the promises made by recent policies. In Sep-22, CBU imports have dwindled down to Rs1 million worth of imports while incoming CKD has also nearly halved (Sep-22: Rs131 million or 2% of all imports).

Even if supply restrictions ease right now, demand may not persevere against all the odds stacked against it. Assemblers are likely to raise prices to bring margin stability which will undoubtedly keep buyers at bay. In the last quarter for Indus Motors, the company recorded a gross loss which would have been a sensational failure except the company’s “other income” became its saving grace helping INDU deliver a net profit at the end of 1QFY23. Other auto assemblers are not far behind as they face all the same issues. There is no good news.

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Rebirth Nov 17, 2022 12:07am
It’s surprising that only one company Sazgar knows about the Rickshaw buy-back program that could turn things around for the auto-industry and the HEV manufacturers in particular because the rickshaws are to be replaced by compact HEVs. Initially, it started out as a rumour on social media but now, as evident by Sazgar’s efforts, there’s clearly some truth to it. The association for the auto industry must take advantage of it and immediately start manufacturing HEVs because there’s apparently $1 billion devoted to this environmental, “fighting climate change” cause by the government. They will buy all rickshaws and replace them with your HEVs. If you sell one compact HEV for $1,000, that’s a million units sold. There’s nothing to think about here. Wonder why they weren’t familiarized with this government program or scheme? Sazgar alone seems to have known. Rickshaws will go obsolete in Pakistan. They’ll either get exported or turned to scrap. The sooner this happens, the better.
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Asad Nov 17, 2022 11:48am
So why don't they become manufacturers instead of assemblers? Surely that would be a win win situation for them, customers and the government as it would be profitable for them, affordable for customers and save import dollars?
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