The current economic crisis has seen the local auto assemblers observing non-production days (NPDs) for several months due to the lack of inventory in hand & supply chain issues in the wake of import restrictions imposed by the State Bank of Pakistan (SBP) & stringent procedures set on the opening of letters of credit (LCs), the production of automobiles in Pakistan has dramatically suffered.
In a joint letter, the Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) informed State Bank of Pakistan Governor Jameel Ahmed that the industry was facing extinction as all supply lines of imported parts and accessories and tooling are completely chocked due to SBP’s restrictions and lack of cooperation from banks.
Related: December 2017 vs December 2022- The Nightmare Continues
The economic downturn & massive depreciation in currency value has also cast a great effect on commodity prices. Challenges coupled with inflation have also greatly reduced the purchasing power of the masses, and together with tightened auto financing conditions, sales of new cars in Pakistan have also taken a toll recently. With a 40% drop, total car sales stood at just 68,900 units during the first 6 months of the current fiscal year compared to 114,774 units sold in the same period of the previous year.
Car prices have become insane as well with around a 35% increase witnessed during the last year alone. This has put ordinary cars way out of the reach of the majority. For example, the top-spec Toyota Corolla is now in the Rs 6.5 million range, Yaris has touched the Rs 5.0 million barrier, and Honda Civic is in Rs 8.0 million territory. Hatchbacks like Suzuki Swift have touched the Rs 4.0 million bracket whereas the Cultus is now in the Rs 3.5 million range.
The cheapest mass-produced car is the Suzuki Alto which also happens to be the highest-selling car in Pakistan. After the latest increase in prices, the 660cc Suzuki Alto is priced between Rs 18.59 lac and Rs 24.23 lac for the base VX and top-spec AGS versions respectively. While the barebone VX trim which cost Rs 18.59 lac doesn’t even offer an air conditioner and comes without alloy wheels, wheel caps, power windows/mirrors, matching door handles/ side mirrors & cd player, and is deprived of the safety features including ABS and airbags, the most in-demand are the better-equipped VXR and VXL trims.
Related: 2023- Dark Clouds will Remain Looming on the Auto Sector
But with Suzuki observing the most number of NPDs than any other assembler, there aren’t enough units of Alto available in the market right now. The high price factor of other cars has forced the customers to opt for Alto VXR/ VXL instead of something better they were able to buy (in the Rs 2.4 million price range) a few months ago.
This has created a huge demand for Alto VXR/ VXL in the market and with a production shortfall, the Alto is being traded for up to Rs 400,000 more than its actual price. Dealerships are asking Rs 2.8 million for ready delivery and with a market where 90% of cars are sold against on-money/ premium, this scenario is no exception.
Related: Auto Industry Wants Import Curbs to End
According to PAMA and PAAPAM, if corrective measures are not taken, this scenario would lead to massive unemployment, loss of government revenue, and closure of auto assembly plants. And with Rupee submerged to an all-time low even after the latest price increase was announced, automakers will likely give yet another push to the prices of cars in Pakistan.
This will eventually create even more demand for Suzuki Alto but with production cuts, and limited units available at the dealerships the premium on this little car is expected to soar even further. Will the 660cc Suzuki Alto enter the Rs 3.0 million price domain, we will have to wait to find out?
A 3d animation professional with over 20 years of industry experience having served in leading organizations & production facilities of Pakistan, an avid car enthusiast and petrolhead with an affection to deliver writings to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com