Volumes across the automotive industry (excluding Kia and Changan) have dropped 38 percent in the first half of the fiscal year, landing at about 84,000 units. By year-end, these volumes at the current pace would stand at roughly 160,000 which is a substantial drop from last year’s near-double volumes. This is not a major low for the industry which raked it in lower volumes during FY20 and FY21 and much lower prior to FY16 when industry-wide capacities were also lower.
The average monthly unit sales are also not near the lowest volumes achieved in the past. However, it is possible that volumes will be even lower than the cumulative 160,000 if the current shortage of dollars continues for another few months. Even if there was demand, and there were buyers willing to buy vehicles on cash, there won’t be enough supply. Most assemblers and auto parts manufacturers have been closing up shop due to their inability to procure their required materials and components from abroad which have to be bought in dollars; precious dollars that are not available. Even though SBP lifted the quota restrictions, banks are urged to only allow essential imports. Industry across sectors that are dependent on imports are keeping shutters down and soon enough, this would lead to lay-offs, especially in the component and parts industry that are smaller and rely on firm orders to survive.
As it stands, volumes will primarily drop due to ongoing supply chain constraints and if they start easing over the next few months, demand-side factors will come into play. Though there is almost always demand cars in the country—many believing it is a good store of value—reduced purchasing power, high cost of borrowing and high inflation will affect the segments that have depleted their savings, are not able to pay cash up-front and were counting on bank loan to make their required purchase. But assemblers can worry about demand later; at the moment, supply alone is bringing them down.
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