Car ownership in Pakistan has declined sharply despite the entry of several new automobile brands. The trend highlights deep structural problems in the country’s auto sector.
According to Indus Motor Company (IMC) CEO Ali Asghar Jamali, the number of car owners per 1,000 people has dropped from an already low 18 to just 11. He said the decline reflects affordability issues, weak income growth, policy instability, and distorted taxation.
He said the calm seen in the economy is only on the surface. Beneath it, long-standing challenges continue to suppress demand and keep Pakistan among the lowest car-ownership countries in the region.
“Give me a consistent policy,” Jamali said. “Any policy will do. But businessmen need certainty to plan long-term investments.”
Jamali stressed that policy inconsistency remains the biggest obstacle. He said frequent changes discourage investors in an industry where investments are planned for decades, not a few years.
“Automobile investments are made for the long term,” he said. “Without stability, investors will remain cautious.”
Still, Jamali expressed cautious optimism. He expects total vehicle production to cross 275,000 units this year. Over time, he believes output could again approach the record 350,000 units achieved in 2021. He linked this outlook to improved macroeconomic indicators and a rise in remittances.
Jamali confirmed that IMC plans to introduce two to three new models in the near future. He added that discussions are underway with investors to secure a few million dollars in funding for localisation of recently launched vehicles.
However, he warned that without income growth and stable policies, the broader market will struggle to expand.
Jamali said per capita income is the key driver of car ownership. Pakistan’s per capita income, currently around $1,700, is far below the level needed for sustained growth in automobile demand.
“International data shows auto markets expand meaningfully once per capita income crosses $3,000,” he said. “Below that level, affordability simply does not exist.”
He rejected the idea that population size alone can create a mass market. “You can have 250 million people,” he said, “but without income growth, you cannot build a viable auto industry.”
Comparing Pakistan with India, Jamali pointed out that India’s per capita income is close to $2,700, while annual car sales exceed four million units. He said once India crosses the $3,000 threshold, it will become one of the world’s largest auto markets.
“That growth is income-led, not currency-led,” he noted.
In contrast, Pakistan’s small volumes prevent economies of scale. Jamali explained that auto manufacturing is highly capital-intensive. Costs fall only when investments are spread across large volumes.
“If one company spreads a $100 million investment over 50,000 units and another over one million units, the cost difference is obvious,” he said.
India’s advantage, he added, also comes from easy access to raw materials and a strong vendor base.
Jamali said direct price comparisons between Pakistan and India are often misleading. In Toyota’s case, he said prices are not significantly different once taxes are excluded.
He explained that Toyota operates in the upper segment in both markets. In India, mass affordability comes from high-volume manufacturers such as Maruti Suzuki and Hyundai.
Jamali described Pakistan’s car market as highly segmented. Below Rs5 million, buyers are extremely price-sensitive. A change of Rs200,000 to Rs500,000 can shift demand quickly.
Between Rs5 million and Rs10 million, sensitivity declines. Above Rs20 million, price becomes largely irrelevant, he said.
This explains why many new entrants target premium segments. “Pricing power exists there,” Jamali said. “But volumes are low.”
He warned that premium cars alone cannot sustain an industry. “No auto market can stand on upper segments only. The foundation must be the lower end.”
Responding to criticism about limited innovation, Jamali said Pakistan’s role in the global auto industry is different. Core design and technology are developed by global principals with massive R&D budgets.
Local assemblers, he said, contribute through localisation, vendor development, job creation, and technology implementation.
“Our biggest contribution is building industrial capacity and human capital,” Jamali said. He added that Pakistani auto professionals are increasingly finding opportunities abroad, especially in Gulf countries.
The message, he said, is clear. Without income growth and consistent policies, Pakistan’s automobile sector will continue to underperform despite new entrants.
Via: Tribune