Why did car sales in Pakistan reach their lowest level in 20 years

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Why did car sales in Pakistan reach their lowest level in 20 years

Almost twelve years ago, in the fiscal year ending June 2022, Pakistan saw a record 55 percent increase in total vehicle sales, with more than 23,500 cars sold in June 2002 alone.

However, after a year and a half until December 31, 2023, the sector’s performance presents a stark contrast. In June 2022, more than 23,500 vehicles were sold in just one month, but if we look at the car sales data in the first six months of the current financial year, only around 39,500 cars were sold in the country. has passed

In December 2023, the number of cars sold in the country was just 5,800.

The vehicle manufacturing sector, known as the automotive sector, has also seen a sharp drop in performance over the past year and a half. Automotive sector experts attribute the country’s general economic situation to the poor performance of the automotive sector, which is why sales in the sector have fallen to their lowest level in 20 years.

These experts are not too optimistic about the performance of the automotive sector even in 2024 and predict that the sector will suffer even more.

What are the car sales figures in Pakistan?

Vehicle sales data in Pakistan is published by the Pakistan Automobile Manufacturers Association (PAMA), the representative body of automobile manufacturers in the country.

According to PAMA data, during the first six months of the current fiscal year, that is, from July 2023 to December 2023, total automobile sales in the country amounted to 39,454 compared to the level of 84,116 in the first half of the previous year. fiscal year. That is, if you compare the current fiscal year with the previous fiscal year, vehicle sales have decreased by 53 percent.

The data shows that sales of both small (less than 1,000 cc) and large (more than 1,000 cc) vehicles have recorded a decline. Similarly, sales of motorcycles and rickshaws in the country also saw a 14 per cent decline in the six months, from 627,835 to 541,821.

Likewise, sales of trucks and buses in the country have also decreased from 1947 to 982 in the same semester. In the automobile sector, only tractor sales saw an increase and their sales increased from 11,513 to 23,411 after a growth of more than one hundred percent.

What are the main reasons for the decline in car sales?
Experts associated with the automotive sector attribute this to the country’s overall economic performance.

Mashhood Ali Khan, an expert in the automotive sector, in conversation with the BBC in this regard, said that the main reason for the decline in the performance of this sector was the lack of foreign exchange reserves in the country because there were no dollars for imports, so that this sector, for this, the import of raw materials from abroad and the production of vehicles in the country has been greatly affected due to the non-opening of the LCs.

He said that on the one hand, production was affected by the non-opening of LCs, on the other hand, the State Bank also set a limit for automobile financing. The central bank allowed financing of only Rs 3 lakh for the purchase of a vehicle from a bank, which affected sales in the sector as a large number of vehicles in Pakistan are purchased on loan from banks.

According to Mashhood Ali, on the other hand, the increase in interest rate by the State Bank also severely affected the sector because after the 22 percent interest rate by the State Bank, the overall interest rate of the banks it becomes 25 percent, and so much more. After the increase in interest rates, consumers found it difficult to purchase a vehicle at the bank, which affected sales.

Mashhood said, on the other hand, that in the last one and a half years the inflation rate in the country has been increasing continuously, which has affected the purchasing power of the common man and the middle class. He said that for these reasons the current situation is that the volume of vehicle sales in the country has reached the lowest level in twenty years.

PAMA Director General Abdul Waheed Khan, speaking to the BBC, said that the high exchange rate and shortage of dollars affected the sector the most because, on the one hand, the import of raw materials was a problem and, on the other hand, , the dollar The price was also very high.

What are the problems that the automotive sector will face in Pakistan in 2023?

Pakistan’s 2,023 vehicle manufacturing plants and units have been plagued by a series of problems, including frequent closures of these plants or operations below their production capacity.

Abdul Waheed Khan, director general of PAMA, says that the biggest problem was the import restrictions that prevented the vehicles from being produced, as the raw materials needed to manufacture them were not available, and therefore the work at the plants was was seriously affected.

Pakistan’s 2,023 vehicle manufacturing plants and units have been plagued by a series of problems, including frequent closures of these plants or operations below their production capacity.

Abdul Waheed Khan, director general of PAMA, says that the biggest problem was the import restrictions that prevented the vehicles from being produced, as the raw materials needed to manufacture them were not available, and therefore the work at the plants was was seriously affected.

Azim Baig, 40, a resident of Karachi, had been working in a factory supplying car parts to automobile companies for ten years. He lost his job six months ago when factory management laid off about 70 workers, claiming that “sales were down” and the workload was too low.

Azeem Baig told the BBC that he worked in the quality control department and had more than 150 employees across his factory, about half of whom, around seventy, were made redundant.

In 2023, automobile manufacturing plant closures and lower vehicle sales have negatively affected the sector and other related sectors, including automobile suppliers, which supply parts and other raw materials for vehicle manufacturing. .

Mashhood Ali Khan said that the first impact of the negative performance of the automobile sector was on the employees working in these factories who worked on daily wages. The frequent closure of plants paralyzed the work of these day laborers, since how could they earn daily wages when the vehicles were not being produced?

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Witnesses said there is a whole wonderful industry associated with automobile manufacturing plants. He said this industry consists of small industrial units that supply spare parts and other equipment used in manufacturing vehicles. Mashhood said many small businesses had to stop working last year and employees were laid off. Mashood said that in the good times, the number of people employed in the automotive sector and related industrial sectors was five million, a figure that has now been reduced to sixteen million.

Due to the closure of the automobile factory and low sales of vehicles, did the Pakistani economy suffer any kind of damage?
Regarding the impact of poor performance of Pakistan’s automobile sector on the country’s economy over the last one and a half years, Mashhood Ali Khan said that this sector is one of the major sectors in the manufacturing sector and when it is on a downward trend. If possible, the biggest loss occurred in the growth of the country’s economy as its share in the GDP decreased while, on the other hand, the income received by the government from this sector also decreased.

Mashhood said the biggest loss came in the form of unemployment, where employees working in automobile manufacturing companies, especially daily wage earners, lost their jobs while related industrial units were shut down.

Economic affairs expert Shahryar Butt, talking about the damage caused to the economy, said that the biggest damage due to negative growth in this sector was in the form of unemployment, which many people who lost their jobs in automobile plants and auto parts factories . Furthermore, people who are in the business of buying and selling new vehicles have suffered huge financial losses.

He said that although the data is not available, due to the stoppage of work in the industry, it also had a negative impact on the development of the country’s economy.

Could there be any improvement in the vehicle manufacturing sector in 2024?
The performance of the automotive sector was negative in the year 2023 and the automotive sector experts are not very optimistic about the performance of this sector in the new year i.e. 2024.

In this regard, Abdul Waheed said that the performance of this sector is related to the entire economy and if there is any improvement in the Pakistani economy this year, then this sector can also perform better. He said that the income of shipping companies has increased internationally which is making raw materials more expensive, on the other hand the dollar is expensive domestically which is making the cost of vehicles more expensive, so the situation for this sector is not Well. It doesn’t seem encouraging.

Mashhood Ali Khan also describes the year 2024 as difficult for the automobile sector. He said that the government says that the interest rate will come down in December 2024 when the year ends, in such a situation car financing will be expensive and on the other hand, the condition of foreign exchange reserves in the country is not very good. Improvements can be expected.

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