After a dreadful 2023, the local auto industry and its stakeholders are optimistic that car sales in Pakistan will bounce back after the upcoming elections scheduled to take place on 8th February 2024. However, it is impossible to say with certainty if this is wishful thinking or if sales are really going to rebound.
Several factors contributed towards a major downfall in sales, so much so that the figures are now back to 20-year-old levels. According to analysts, three factors dented the demand for cars following frequent closures of assembly plants during 2023. First off, there was a massive current account deficit in Pakistan due to which, restrictions on obtaining Letters of Credit (LCs), and certain controls on foreign exchange were enforced by the State Bank of Pakistan. The supply chain was disrupted as automakers could not obtain LCs and clear cargo that was stranded at the port. Vendors were unable to import their raw materials, and CKD parts were unavailable.
Secondly, the foreign exchange rate for Pakistan increased dramatically from Rs 180 to well above Rs 300, driving up the prices of cars and discouraging people from buying them. Third, the sale of cars via financing was impacted by the interest rate rising from 7% to 22% within a couple of years.
The last three months of calendar year 2023 saw sales of new passenger vehicles dangling around a dismal 5,000 units a month. While January 2024 sales data is still awaited, February sales are expected to remain subdued due to elections, however, sales might pick up momentum from March onwards, believes auto industry stakeholders as the new government might bring economic and political stability while anticipated measures such as reduced interest rates might lure some buyers into purchasing cars via financing.
Realistically speaking, though, sales aren’t going to rise until appropriate measures are taken to transform the industry and benefit the majority of the masses including auto consumers. Sales of new cars in Pakistan will increase with equal taxation across all sectors, which means relatively lower taxes on automobiles, equitable distribution of benefits among the wealthy, decrease in inflation, increased breathing room for the masses, and the development of comprehensive policies that facilitate the introduction of modern, fuel-efficient, and reasonably priced cars for the general public.
A computer animation professional with over 23 years of industry experience having served in leading organizations, TV channels & production facilities in Pakistan. An avid car enthusiast and petrolhead with an affection to deliver quality content to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com