KARACHI: The financial year 2023 has brought significant challenges to Pakistan’s automotive industry, with original equipment manufacturers (OEMs) experiencing a staggering 55 percent drop in volumes, creating a cascading effect on auto parts manufacturers, operating plants below 70 percent capacity.
Talking to a group of journalists, Mohsin Siddiqui, General Manager Plant at Agriauto, expressed the industry’s woes, stating, “We manufacture 459 dies and 155 parts for the auto industry, and for that, we have invested billions of rupees from 2019 to 2023, but due to ongoing crisis, Agriauto production has dropped to less than 30% from 140%.
“We have invested a substantial sum of Rs 2.5 billion solely for Toyota Cross, Pakistan’s first hybrid electric vehicle. However, the unabated challenges within the auto industry, including demand and supply issues, are nullifying their overall investments.
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Major OEMs such as Indus Motor Company, Honda Car, and Suzuki Motors were forced to halt their production due to low demand. These closures saw Indus Motor Company shutting its plants for 58 days, Honda Car for 78 days, and Suzuki Motors for 89 days between October 2022 and August 2023.
Adding to the industry’s woes, imported used cars have gained a significant foothold, capturing 25% of the market share in July this year. This development has had a severe impact on the auto parts manufacturing sector.
During the financial year 2023, Pak Suzuki secured the largest chunk of sales at 52%, followed by Indus Motor Company at 25%, and Honda Car with a 13.5% share.
Furthermore, despite achieving substantial localization, the sluggish demand due to the low purchasing power of customers amid record-high interest rates has been undermining the growth patterns of local auto parts manufacturers, he added.
Mohsin said that they were predicting a decline in sales by 8 to 10% during the financial year 2024 and added that this downturn would have a detrimental impact on the vendors’ strategy of working towards ‘Make in Pakistan’ production and contributing to the localization of the auto industry.
Synthetic Products Enterprises Limited (SPEL), another automotive parts manufacturer, shares similar concerns regarding the current economic turmoil’s burden on auto parts manufacturers.
Mirza Sikandar Baig, General Manager - Plant at SPEL, lamented, “The current uncertainty in the local auto industry is creating unemployment and wasting the investments of millions in machinery and infrastructure.”
“This equation clearly shows that used car imports have become the second biggest seller in the local auto industry, equally crippling both the auto industry and auto parts manufacturers,” he said.
He highlighted their significant investments, including a 700-million-rupee plant in Karachi in 2021, imported robots for the production line, and the acquisition of Rs 30 million in designing 35 moulds for plastic interiors.
Despite such investments, the auto industry’s capacity plummeted from 60% in August 2022 to 19% in June 2023, creating turmoil for auto parts manufacturers.
Sikandar emphasized the complexity of the auto parts manufacturing process, which takes around two years from planning and designing to production to meet global standards. He urged the government to extend support to the auto industry and auto parts manufacturers, citing the need for stability to foster business growth.
As Pakistan’s automotive industry grapples with these challenges, industry players and policymakers face the task of collaboratively finding solutions to revive the sector and protect the investments made by manufacturers.
Copyright Business Recorder, 2023