Business Pakistan

Pakistan’s Auto Industry in deep crisis

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KARACHI: Pakistan’s auto industry has fallen into a historic crisis as the latest figures reveal. While car sales in July 2019 declined by almost 50 %, there are solid reasons to expect further downfall by the end of August.

According to the data released by Pakistan Automotive Manufacturers Association (PAMA), the sales of Honda cars declined 66 % to 1,694 units in July 2019 as compared to the same month last year, when it sold 4,981 units in July 2018.

Similarly, the sales of Toyota vehicles witnessed a fall of 56 %, as the company managed to sell only 2,413 units in July 2019 as compared to 5,468 cars in July 2018.

The sales of Suzuki registered a decline of 23 % in Pakistan.

Industry sources claim that the Government’s recent steps are not only diametrically opposite to what had been promised in the Auto Development Policy 2016-21 (ADP) but have also adversely impacted the process of industrialization in the country.

The ADP had set the target of producing 550,000 units per year. If the current state of affairs continues, auto sector could witness a revenue loss of around Rs. 225 bn per annum besides a job cut for 1.8 mn people.

An industry insider revealed, “An increase in the advance customs duty on all raw materials and an imposition of 2.5 to 7.5 % federal excise duty (FED) announced in the current budget proved deadly for the industry.”

He further added, “Besides, huge devaluation of Pakistani currency against the US dollar in recent times has severely affected all future plans of the industry.”

It is pertinent to mention that the local auto industry had invested approximately Rs.140 bn during the past few years while it new entrants planned to invest around $1.3 billion further in the industry.

On the back of lackluster sales, Honda kept its plant closed for 12 days in July while Indus Motor Company reduced its production work to five days a week.

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