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Car Industry Down in The Dumpster: Economic Survey

After witnessing stellar growth in the last two years, Pakistan’s automobile industry has fallen back to square one due to the economic instability in the country.

As per the latest Pakistan Economic Survey, the growth of the automobile sector has fallen by a staggering 42.48% between July-March of the current fiscal year (FY 2022-23) against 53.77 percent growth the year prior (FY 2021-22).

The drop in production has been attributed to the shortage of components and completely knocked-down (CKD) kits due to regulated imports.

The report also highlights that consecutive price hikes on account of higher inflation, persistent depreciation, and limited financing are the biggest deterrents to growth in the future.

It adds that the policy rate, which was at 10% last year, gradually rose to 21%. Concurrently, the Pakistani rupee depreciated significantly, and inflation continued to soar.

As a result, auto financing became more expensive, while inflation drove up car prices, dampening demand in the market due to reduced disposable incomes. Furthermore, the industry faced challenges due to sales tax, capital value tax, and withholding tax hikes.

The decline in production and sales has been observed across the board and was primarily attributed to import restrictions that resulted in intermittent production closures, leading to a loss in growth for the industry.

The report highlighted that the automobile sector contributes approximately 4% to Pakistan’s GDP and constitutes around 15% of the Large-Scale Manufacturing (LSM) sector. It is also a major revenue generator and job multiplier.

Due to the recent market slump, the auto sector’s progress has been hampered badly.

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