Crisis hits demand of low-end cars the most in Pakistan: PAMA

The demand for price-sensitive low-end cars in Pakistan dropped significantly in February amid supply chain issues and rising vehicle prices.

According to data released by the Pakistan Automotive Manufacturers Association (PAMA) on Monday, Pak Suzuki, which was once seen as catering to the entry-level segment, saw its sales drop 92% year-on-year to just 978 units in February this year.

The company managed to sell just 72 units of 1,000cc Cultus (down 96% year-on-year) and 544 units of 660cc Alto (down 92% year-on-year).

“Purchasing power of Pak Suzuki customers has fallen as compared to Toyota and Honda,” research analyst Wasil Zaman told Business Recorder. “These numbers include the impact of supply chain issues as well.”

The development comes as the auto industry, heavily reliant on imported parts and material to assemble vehicles at local plants, faces immense supply chain issues amid exchange rate volatility and depleting foreign exchange reserves.

The low level of forex reserves has forced the government to place restrictions on opening of letters of credit (LCs) through the State Bank of Pakistan for several sectors including automobile. These things have also disrupted the supply chain for auto companies.

Toyota was the second-most affected company as its sales dropped 61% year-on-year to 1,803 units in February. The sales of Corolla and Yaris variants dropped 70% year-on-year, however, the bookings of high-end Fortuner and Hilux sales dropped at a lower proportion of 28%.

The sales of Honda Atlas Cars dropped 40% to 1,636 units year-on-year in February.

Meanwhile, Hyundai Nishat Motor bookings stood at 1,271 units in February. They were 13% down year-on-year. The company managed to sell 708 units of its crossover SUV Tucson this year in February which is 9% or 66 units lesser as compared to last year.

Research Analyst Sunny Kumar said car sales were down due to non-availability of CKD parts amid LC issues which led to non production days.

The total sales of cars and light commercial vehicles (LCVs) were down by 74% in February.

“In the eight month of fiscal year 2023, weak demand dynamics were also evident from a 45% (month-on-month) fall in industry sales in February. This is primarily attributable to escalating car prices, expensive auto financing and low purchasing power of consumers,” Kumar said.