Auto industry turns the corner after sales slump

The Pakistani auto industry has been through a roller coaster ride in recent years. However, the easing of a ban on imports has led to a resurgence in auto sales, signaling a positive shift for the industry, reports WealthPK.

The automobile sales surged to 7,579 units in August 2023, posting a staggering 49% month-on-month (MoM) increase. However, on a year-on-year (YoY) basis, sales decreased by 36%.

The Pakistan Auto Manufacturers Association (PAMA) data shows that compared to the same period last year, car sales in the first two months (July-August) of the current financial year declined by 47% to 12,671 units.

“Auto sales have recently resurged in Pakistan as a result of the government's decision to lift import restrictions on cars,” said Abdul Waheed Khan, a senior representative of the PAMA.

“Prior to this positive development, the industry had been grappling with a decline in vehicle sales, primarily driven by a confluence of challenges,” he said.

“First and foremost, the ever-increasing prices of cars have placed a significant strain on consumers' budgets. The escalating production costs, coupled with inflationary pressures, pushed car prices to levels that were simply beyond the reach of many potential buyers. This, in turn, led to a shrinking customer base and dampened overall demand in the market,” the representative explained.

“Furthermore, the cost of auto financing became prohibitively expensive for a substantial portion of the population. High-interest rates and stringent lending criteria deterred many prospective buyers from pursuing car loans, thus further stifling sales. The limited purchasing power of consumers in the face of these financial barriers only exacerbated the situation,” he added.

“However, a ray of hope emerged during July and August of 2023 when import restrictions on vehicles were lifted. As a result, vehicle sales reached their highest level since March 2023,” he said.

“Although the auto industry still faces production shutdowns and operational issues, these sales figures are a positive sign for the industry. In the future, however, only time will tell whether or not the industry can maintain its momentum,” he said.

According to WealthPK research, in response to inflationary pressures, consumers have gravitated towards smaller cars with engine capacities below 1,000cc. This shift in preference has led to a significant 85% month-over-month increase in sales of vehicles in this category.

Company-wise data shows that Indus Motor sold 1,548 units in August 2023, up by 13% from the previous month.

Pak Suzuki Motor Company contributed the most to the rise in month-on-month sales, with a massive rise of 75%. It sold 4,268 units in August 2023. Of the total, the company sold 2,769 units of Alto against July sales of 1,440 units, up by 92%.

Honda Atlas Cars’ sales showed a MoM surge of 36% as it sold 674 units.

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