Is it the End of the Road for Local Assemblers?

You decide to buy a new car, you go to the nearest dealership to buy a brand new car of your choice only to discover that the vehicle will be delivered after 6 months even if you pay in full. However, if you choose to pay the on-money/premium, an undocumented payment purportedly divided between dealerships, the person who booked the vehicle, and the automakers themselves, the vehicle will be delivered within days.

For years and years & even decades, things have been like this in Pakistan. According to a PIDE report, 90% of new cars in Pakistan are sold at premium/ on-money. Even in the case of newly launched cars, you reach the dealership in the opening hours of the very first day of booking only to discover that all the units have been mysteriously booked & the vehicle can only be delivered if the premium is paid.


But times have changed, and they have changed dramatically. During the last 16 months or so, car sales have plunged dramatically due to successive outrageous price hikes amid deteriorating currency value, import restrictions on CKDs, and stringent car financing conditions which resulted in a deplorable 53% decline in sales. Together with rising inflation and challenging economic times, even those with good purchase power prefer to keep using their existing cars instead of buying newer ones.

Related: 2023- Dark Clouds Will Remain Looming on the Auto Sector

The alarming sales scenario has thrown the hoarders (investors) out of the equation. Now assemblers are desperately trying their best to lure people into buying cars with various offers & bank financing options. The most interesting thing is, cars are now readily available for delivery. Even the bestsellers for which people generally had to wait for several months are now available within 10 days. This shows that units are literally lying unsold at assemblers’ disposal with no buyers around to fetch them.

Various Pak Suzuki promotion campaigns

To begin with, Pak Suzuki has announced to extend all its running offers in the month of October too. These include a financing offer via HBL that promises to benefit Rs 600,000 in savings, free maintenance, and savings on markup & insurance, as well as the exchange offer, which allows customers to trade in their old vehicle with a brand new Suzuki car, and an exchange bonus of up to Rs. 150,000 along with free registration for the new car. Furthermore, the company has also extended its Price Lock offer, however, it is not applicable to Suzuki Alto VX and Suzuki Cultus VXR, which happen to be the company’s best sellers.

IMC deals for Toyota Corolla and Yaris

Indus Motor Corporation (IMC) has also announced an installment plan for the Toyota Corolla and Toyota Yaris with delivery in just 10 working days. However, the offer is valid on selected variants only.

Various Honda Atlas deals

Honda Atlas isn’t the one to be left behind too. Via car financing deals partnered with various banks, the company is offering free registration, a free 4th-year warranty as well as quick deliveries in 30 days for City, 15 days for HR-V, and immediate delivery for BR-V. Surprisingly, however, there is no mention of the Honda Civic in any of the deals.

Other assemblers running various promotions

Other assemblers including Kia, Changan, and Proton are also advertising similar promotions to entice customers to buy their new cars. All of this may sound good, but the most somber fact is that the economy is still in a dire situation with little sign of improvement. Despite the Rupee regaining some of its lost power against the US Dollar, assemblers aren’t interested in lowering prices, suggesting that the value of the currency may once again depreciate & the recovery is only temporary in nature.

Screenshot 2023 10 05 at 21 51 50 Pakistan’s headline inflation reading clocks in at 31.4% in September
courtesy: Business Recorder

As long as car prices stay where they are, or if pushed further, there is no magical formula to bring people back into buying automobiles. Secondly, rising electricity and commodities prices, as well as increased taxes on the middle class, aka volume buyers, will continue to erode the purchasing power of the masses.

Related: How Stagnation Has Harmed Pakistan’s Industrial Capabilities

For how much longer auto assemblers can manage to dampen their declining profits with higher car prices remains to be seen. But given the economic climate, sales don’t seem to be picking up in the near future. According to analysts, car sales may remain dwindled will the first half of 2024. However, up to that point, it will be extremely difficult for small vendors and auto parts makers to withstand the crisis. Selling a small number of exorbitantly costly SUVs isn’t going to be a very fruitful long-term strategy, therefore local assemblers will need to come up with novel ideas, think out of the box, or consider analyzing the export route to ensure their survival. Otherwise, it will probably be the end of the road for most players.

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