Why Pakistanis are buying fewer cars now than before

The Pakistani automotive industry is trudging through troubled times as multiple stumbling blocks emerge to make an already challenging environment even more arduous. Sales of personal cars and two-wheelers have been on the decline for most parts of this year and the future prospects do not evoke much hope either.

According to a local media report, car sales in Pakistan were down by as much as 51 per cent to 47,178 units in 1QFY23. Net sales fell to PKR 37 billion from PKR 66 billion in 1QFY22, a fall of around 43 per cent. Profit after tax has also nosedived. Auto financing also tumbled between the months of July and September.

There are multiple reasons why the current situation within the automotive industry in Pakistan is grave. Some of them are as follows:

Supply-chain disruptions:

The global automotive industry at large has had to battle crucial and often critical shortage of key components that include semiconductor chip. This is true in Pakistan as well. Import of crucial automotive parts fell in the country. Pak Suzuki Motor Company, for instance, had to shut its production facility for 28 days between August and October. Indus Motor Company - assembler of Toyota vehicles in Pakistan - and Honda Atlas Cars also announced temporary production halt periods. A direct fallout of this has been fewer new vehicles available to end customers.

Economic woes:

Pakistan's economy has been struggling for quite some time now but unprecedented - and tragic - floods earlier this year as well as Covid pandemic over past few years have worsened situation. High inflation and low purchasing power have contributed to muted sentiments. Demand to do away with restrictions on import of auto components have fallen on deaf ears. Devaluation of the currency is also believed to be hurting prospects.