Revving Up: The Shocking Drop in Pakistan's Car Sales and Its Impact on the Auto Industry

Hello everyone,

We have received some latest updates on the automobile market in Pakistan. According to the analysts at JS Global, the volume of car sales in Pakistan for February 2023 is likely to drop to 4.4 units, which is down by 53% month on month. This is expected to hit a 14-year low, which is quite alarming.

The reason behind this predicted drop in sales is reduced operating days for Indus Motors and Pak Suzuki Motors, along with restricted demand in the sector. This is due to limited foreign exchange reserves and administrative controls to curb imports still in place.

The analysts further suggest that volume for automakers is expected to remain at low levels, taking into view production issues, price hikes, tax changes, and interest rate hikes. The cumulative volume decline during fiscal year 2022-2023 is expected to clock at more than 50% year on year, extending into the first half of fiscal year 2023-2024.

HCAR is expected to witness a relatively lower decline compared to its peers sequentially as the company’s plant remained operational in January 2023 and February 2023 both.

The automobile industry in Pakistan is facing a challenging time, and it is expected to remain that way for a while. The limited forex reserves and administrative controls to curb imports are still in place, which is why volumes for the automakers are expected to remain at low levels. This will be further compounded by both supply and demand-side impediments.

In the local auto parts industry as well, manufacturers such as Agriauto Industries Ltd (AGIL) are opting for plant closures due to the ailing demand in the sector and import curbs.

Once import controls are relaxed, automakers will continue to face challenges due to sky-high prices driven by sharp PKR devaluation and higher interest rates. The automakers have already increased prices 3-4 times in the current year to date by up to 29% in response to sharp PKR devaluation against the US$ by 12% during the same period and increase in GST from 17% to 18% as announced in the Mini Budget.

In summary, the automobile industry in Pakistan is going through a tough time. The automobile companies are facing multiple challenges, including supply and demand-side impediments, production issues, price hikes, tax changes, and interest rate hikes. The situation is expected to remain challenging for the coming months, and it will take some time for the industry to recover.

We will keep you posted on any further updates. Stay tuned!