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Car Manufacturers And Assemblers Are Likely To Leave Pakistan

Some car manufacturers and assemblers plan to depart Pakistan. The conclusion was reached after considering the substantial issues confronting the automotive industry.

As a result of political and economic uncertainty, the automobile industry is facing a lot of challenges in terms of income and growth. In a management briefing, Indus Motors stated that the automobile industry is coping with unexpected external challenges. Among the issues are the unprecedented depreciation of the currency and SBP import restrictions. According to Topline Securities, he also stated that certain firms may exit the market.

In a corporate briefing, Indus Motors analyses the first quarter’s financial results as well as the company’s outlook for the upcoming fiscal year. Due to SBP limits, INDU is currently operating at 40-50% of its maximum capacity. The administration, on the other hand, does not expect this to change anytime soon.

Aur Sunao - Car Manufacturers And Assemblers Are Likely To Leave Pakistan
Aur Sunao Car Manufacturers And Assemblers Are Likely To Leave Pakistan

At the present manufacturing rate, INDU’s order book is full for the next three months. Purchases will be easily supplied within 4-5 weeks if the SBP relaxes restrictions.

Furthermore, increasing inflation and poor consumer buying power have had a significant impact on the entire auto industry. As a result of increased interest rates and shorter loan terms, the share of car finance has reduced from 35% to 10%. After removing 39% taxes and charges, management estimates that the Yaris and Corolla were produced locally at a rate of 656%.

According to management, 400 to 500 clients cancelled their bookings as a result of the recently implemented return policy. They also received their money back with interest payments. A $100 million investment strategy is being developed for regional HEV vehicle manufacturers. However, the company plans to launch its model by the end of 2023.

In the first quarter of FY23, car sales in Pakistan fell 51% year on year, with INDU sales decreasing 52% to 8,994 units. In the first quarter of FY23, used automotive imports totaled 1,039 units. According to the report, net sales fell 43% to Rs 37 billion in 1QFY23 from Rs 66 billion in 1QFY22. SBP has badly hurt the industry by restricting imports. Furthermore, due to the gross loss, earnings after tax fell 76% year on year to Rs 1.3 billion from Rs 5.4 billion.

INDU recorded a 6% gross loss in the first quarter of FY23, compared to an 11% profit in the first quarter of FY22, due to the rupee’s depreciation against the US currency, increased freight expenses, and rising commodity prices. According to management, there will be a loss in 2QFY23, but it will be smaller than in 1QFY23.

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