Why crisis-struck Pakistani auto industry faces massive threat in Covid-19 times

Between July of 2019 and February of 2020, automobile sales in Pakistan had tanked by as much as 44% compared to the period between the same months in 2018-19. Cars, jeeps, bikes, trucks - every form of vehicle was finding fewer takers in a country that has been on the verge of financial collapse for quite some time now. While several industry experts have often said that the automotive sector here has been on life support, the Covid-19 pandemic may have cut the cord.

The automobile sector contributes 4% to Pakistan's GDP. The figure is around 7.5% in far bigger economies like India, approximately 5% in China and the same in Germany. And while it won't be fair to either compare the auto sectors or the economies in and of these countries, the contribution of the automotive sector is extremely vital for Pakistan, perhaps more so than in most other developing countries due to the state of the economy.

Demand was dwindling for quite some time in the country due to the economic pressures but the situations arising due to the Covid-19 pandemic has the potential of dealing a deafening blow to the Pakistani auto industry. Auto makers such as Atlas Honda, Yamaha, Honda Atlas Cars, Indus Motor, Pak Suzuki Motor Company, among others, suspended production on March 23, according to a report in Tribune. The same report has highlighted just how precarious the situation is for automakers who had challenges galore before the onerous tasks arising out of Covid-19 emerged.

The industry has made several appeals in the recent past for a bailout package from the Imran Khan government - some of these were before Covid-19 diesease was even detected anywhere in the world. Other demands made include cutting import duty on completely knocked-down (CKD) units, cutting utility bills and decrease in sales tax.

A country desperate for more funds and reportedly a victim of a 'Chinese debt trap', Pakistan however can ill-afford to give much leeway of any kind or form to automakers. An industry expert in the country even likened the present situation to a natural disaster.

Except there is nothing natural about the disaster that has been in the making for some time, only to be compounded massively by the health crisis.

It is crucial to point out here that the ill-effects of the situation arising from Covid-19 crisis is not just being felt by Pakistani auto industry but the global automotive sector as a whole. Cars and bikes sales have collapsed, factories either remain shut or are only now stuttering back to life, and auto makers are fast looking at governments around the world for stimulus packages of one kind or the other. What makes a grim global outlook even grimmer in Pakistan though is its already woeful economic state and the condition that the automotive sector here found itself in even before the pandemic. Recovery of the automotive sector around the world may be extremely gradual but the ground realities in Pakistan especially point to a strenuous crawl ahead.

Note: HT Auto has reached out to Pakistan Automotive Manufacturers Association (PAMA) for inputs. This copy will be updated if and when PAMA responds. Meanwhile, PAMA's official website currently provides no insight/details on the current situation.