Three percent. That’s the share of imports occupied by automobile CKDs in the 3QFY22—the quarter that marked the highest-ever CKD imports in history. This share has never been higher than 3 percent—mostly remaining between 1-2 percent. As small as that contribution truly is, it sure has garnered an inordinate level of attention among policymakers trying to curtail imports. Luxury imports that is!

After much effort—that does not only constitute of the import restrictions on LC that affected nearly all sectors but also SBP’s targeted efforts to discourage auto financing that in turn dampened demand for loan-backed cars—in 1QFY24, total CKD imports have shrunk considerably, down 28 percent. Notably, CKD imports were even lower in the quarter before this, the last quarter of FY23 (see graph). For motor car CKDs, the decline is 26 percent.

Stuck between a rock and a hard place, automobile volumes have shrunk accordingly too. It isn’t just supply restrictions that forced assemblers to keep their plants shut down for much of the year, it is also demand. With auto financing out of the picture—courtesy the prevailing interest rates and stricter prudential regulations for auto loans—much of the demand was to come from cash. But cash at hand is dearer than ever before as inflation picked people’s pockets quite literally as households struggled to make ends meet. Corresponding to the latest available data for imports is the 1QFY24 data for automobile volumetric sales; for passenger cars alone, sales fell by 44 percent year on year (in 1HFY24, passenger cars are actually down 56%).

That seems like higher than the decline in CKD imports, but if we were to keep PKR-USD constant at the average during 1QFY23, total CKD imports would have reduced by 41 percent in 1QFY23—mirroring the reduction in volumetric sales. Since assemblers only import based on the actual bookings (i.e. demand), the two numbers align.

In value terms, in the first half of the fiscal year, about 30,000 passenger cars were sold, which was roughly 69,000 units in 1HFY23, and a little over 100,000 in 1HFY22 (the peak year). As much as we love talking about cars in this country, and as much as it attracts the attention of many policymakers—who sometimes want to encourage automobile assembling in the country to other times purposefully curtail any organic demand (and supply) for it—the market is just too small. Its growth inconsequential; over the years catering to only a small section of the population. Never achieving competitiveness or scale. In FY24, it will be smaller and less consequential still, even if the companies that assemble these cars make enough money for themselves.