Not the Ideal Start to New Fiscal Year for Local Assemblers

The start of a new fiscal year is generally positive but times are tough for the local auto industry which is battling with massively depleting sales, particularly since August of last year, was unable to get an ideal start for FY23-24.

According to the data released by the Pakistan Automobile Manufacturers Association (PAMA) just 5,092 units were sold in July 2023 compared to 11,925 units sold in July 2022, witnessing a deplorable 57% decline in sales.  There are multiple reasons behind such a massive decline, the most obvious being the ridiculously high car prices which have breached the levels of normalcy and are in a new league of madness. Then there is the declining purchase power of the masses and the deteriorating economic & political scenario of the country.

Related: FY23 was Nothing Less Than a Nightmare for Local Auto Industry

Plus there are other factors too, such as low production volumes caused by plant shutdowns owing to a lack of CKD inventory, as the government put a cap on import quota to save the outflow of precious foreign reserves. Then the expensive & impractical car financing due to insanely high interest rates, which currently stand at a whopping 22% as opposed to just 7% in March 2020. This has put nearly 40% of buyers who used to buy new cars via financing, out of the equation.

Honda showroom pk

Coming back to July 2023 sales, the gloomy picture begins with Honda Civic & City, the duo saw 2,408 units sold in the same month last year but with an appalling 91% decline were able to post just 208 units in July 2023. The situation with Toyota Corolla & Yaris was a little less daunting, with 1,067 units sold last month, compared to 1,734 units in July of last year witnessing a 38% fall in sales.

yaris rolla 2

Pak Suzuki experienced less damage with Swift but suffered tremendously with its ostensibly less costly models. Swift suffered from a 22% decline in sales with 249 units sold in July 2023 compared to 321 units sold in July of last year. The 1000cc Wagon R and Cultus suffered from a 55% decline in sales with only 422 units (combined) sold, compared to 943 units sold in the first month of the previous fiscal year.

Pakistan’s bestselling car, the 660cc Alto, suffered from a 68% decline in sales in July 2023 having sold only 1,440 units as opposed to 4,618 units sold last year in July. The old grandpa Suzuki Bolan also suffered from a 68% dip with 146 units sold last month compared to 353 units in July 2022.

Related: Local Assemblers and Their Allergy to Used Car Imports

Toyota IMVs (Fortuner and Hilux) suffered from a 53% reduction in sales. The duo sold 641 units (combined) last year in July but managed only 301 units in the first month of the current fiscal year. According to sources, Non-PAMA members such as Kia, Changan, Haval, Chery, and Proton have also seen a significant drop in sales. However, the only exception was the Hyundai Tucson which experienced an increase in sales from 104 units sold in July last year to 328 units sold in July 2023 enabling a 215% surge in sales.

Although despite sales cutting into half, assemblers particularly the Big 3 (Suzuki, Toyota, and Honda) were able to maintain their profit margins owing to a massive increase in prices but that’s not going to be a long-term solution as sales are continuing to come down nosediving. Assemblers which generally used to dangle their customers for up to 8 months are now offering instant deliveries, as hoarders are getting out of the equation too.

Related: How Viable is Car Financing Today?

But it’s difficult to predict a comeback in sales of locally made automobiles with the currency depreciating further and cars becoming a low priority for the general public. Analysts believe that the current demand dip will last halfway through 2024, so the upcoming time won’t be any easier for anyone. By that point, only time will tell how many (assemblers) will be able to survive.

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