In 2023, the auto sector in Pakistan faced a tumultuous period marked by economic and political upheavals. Burgeoning inflation took a toll on consumer demand, causing a ripple effect on car prices and disrupting the industry’s stability.
Additionally, a decrease in the importation of parts and accessories posed supply-chain challenges, highlighting the interconnectedness of the auto sector with the broader economic health of the country.
Resilience and Recovery
Despite the challenges, Pakistan’s auto industry remains resilient and poised for recovery in 2024. The industry’s potential is underscored by an estimated additional demand of 350,000 units every five years, driven by the country’s growing young population.
The launch of the locally-manufactured Toyota Corolla Cross Hybrid Electric Vehicle by the Indus Motor Company (IMC), sourcing over 50% of automotive parts locally, exemplifies the industry’s adaptability.
Analysts anticipate positive developments in 2024, with potential government negotiations with the International Monetary Fund (IMF), easing of imports, and new incentives for auto manufacturers under the new government.
While 2023 witnessed a stark contraction in sales, experts narrate the optimism, foreseeing improved economic confidence post-elections leading to a recovery in both demand and supply.
Anticipating a Brighter 2024
Looking ahead, the industry anticipates a positive trajectory as it embraces technological advancements, focusing on factors like comfort, safety, and quality.
As the political landscape stabilizes and potential interest rate reductions loom on the horizon, coupled with targeted economic revival actions, the auto market in Pakistan is positioned for growth.
The key to sustained growth lies in comprehensive policies, both locally and internationally. Industry leaders advocate for a ten-year plan activating the Pakistan Standards and Quality Control Authority (PSQA), reducing taxes, and fostering small and medium-sized enterprises (SMEs). This strategic approach aims to ensure the well-being of over 3.5 million families whose livelihoods depend on the auto industry.
While 2023 presented formidable challenges, the auto sector in Pakistan stands at a critical juncture. As the industry adapts to new technologies and envisions a future beyond traditional fuel sources, the collective efforts of policymakers, industry players, and consumers are essential for steering the auto sector towards a positive and sustainable future in 2024 and beyond.
A few years back, the same industry experts that you are “quoting”, predicted that, by now, Pakistan would be a 500,000 units a year assembly country and on its way to a million. Yet things have gone seriously south since then as we all know.
Judging by the sales figures we have seen the past year, how can the local assembly figure reach 350,000 units annually? More importantly, judging by the sky rocketing increases in prices, WHO will buy them?!
We are talking about IMF bailouts; again! We have already seen what that has wrought in the past year. Let us not delude ourselves and let us not forget. Pakistani currency was the worst performing in Asia and international experts are predicting that the rupee will further fall against the dollar. That kind of goes hand in hand with bailouts. And whatever bailout IMF will give us will barely be enough to keep the lights on and cover basic needs. Again, there will be no room for splurging on un-necessary imports of parts for local vehicle assembly which is a burden on the economy. So, in the coming year, what are the local assemblers, especially the old experienced three, going to do to remedy that situation? Will exports finally be part of the equation? These “experts” are touting the 350,000 unit assembly annually. Any of them marked for exports?
The old three local auto industry leaders really like to throw around this 50% localization figure. So, let us do a quick comparison. According to reports, Morocco’s auto sector grew by 30% in 2023. It brought in over 8 billion dollars of foreign revenue from its exports of both parts and CBU vehicles. Morocco has an average localization rate of 60%. Yet it did over $ 8 billion in foreign business for the country.
Our local auto sector leaders have always maintained their 50% localization rate in their vehicles. There is very little difference between 50% and 60%; Yet, in all the time they have been operating in Pakistan, they have never brought in even a fraction of what the Moroccan auto companies and vendors did in the past year alone!
“Sustainable futures”… In thirty years, our auto sector is still struggling to get the basics right.