Pakistan’s economic challenges continue unabated, proclamations of the government notwithstanding.
Every industry is facing challenges. Pakistan’s car industry is in deep trouble. Sales decreased in FY23 by almost 56 percent to 126,879 units from a year ago.
According to reports, “The plunge in car sales is driven mainly by three reasons. First, the demand for auto loans, historically a major driver of car sales in the country, is declining significantly because of the State Bank’s enhanced requirements and soaring interest rates. Secondly, the restriction imposed by the central bank on the import of CKDs and parts to slow down the dollar outflow meant that the industry produced fewer units last year compared to the previous one. Thirdly, the huge increase in prices due to the rapid exchange rate depreciation and record headline inflation has put even the cheapest car out of the reach of most people.”
Analysts argue that under the current scenario “the government’s and industry’s ambitious target of expanding the local car market to 500,000 units by FY26 will be difficult to achieve owing to the lacklustre demand, especially from middle-income people.”
As an editorial in Dawn warned, “For far too long, the government has ignored calls for creating a competitive market that would facilitate people to transition from two-wheelers to small cars, and from small cars to bigger ones. Dependent totally on imports, local car assemblers will not position themselves to serve the needs of Pakistani consumers, especially the middle class, unless they are exposed to true competition that forces them to localise and become part of the international supply chain.”
