The automobile sales in Pakistan fell to the lowest level since June 2020 as they witnessed a drop of 36% month-on-month to 10,867 units in January 2023, according to the data released by the Pakistan Automotive Manufacturers Association (PAMA) on Monday.

On a year on year basis, car sales fell 47%.

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Pak Suzuki, which holds the biggest share in the market, saw its sales plummet 74% month-on-month in January 2023. The company managed to sell only 44 units of the popular Alto model against 6,898 units in December 2022.

The total sales made by the company stood at 2,946 units as opposed to 11,342 units in December 2022.

Meanwhile, Indus Motor Company (Toyota) and Honda witnessed an improvement in their sales by 26% and 30% month-on-month to 3,570 units and 2,704 units, respectively.

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On a year-on-year basis, sales of the two companies plunged by 47% and 33%, respectively.

Meanwhile, Hyundai Nishat Motor reported significant surge in sales on a monthly and yearly basis. The bookings of the firm were up 81% month-on-month and 86% year-on-year. The Korean car manufacturer managed to sell 1,140 units in January.

Industry experts told Business Recorder that the biggest reason behind the drop in sales of major car manufacturers is the issue pertaining to the opening of the Letters of Credit (LCs). Car companies are unable to import completely knocked down (CKDs) units due to this problem, they said.

Auto sector Mashood Khan said that “there are around 3,000 to 3,500 parts in a car and if a company fails to import just one part, it will not be able to manufacture the car.”

Pakistan has moved to curb dollar outflow through restrictions on imports. Many sector of the economy including automobiles have either scaled back or shut down operations owing to inability of firms to open LCs.

The country’s foreign exchange reserves are at a critical level of $2.92 billion – lowest since February 2014 while the Pakistan rupee has depreciated significantly. It is one of the main reasons for record inflation in the country. Lately, car manufacturers also hiked prices by significant proportions.

The analyst was of the view that the unprecedented increase in car prices was unsustainable.

“The buying power of consumers has also tanked because the economy is struggling due to a slowdown,” he said. “As far as I see, auto sales will remain low this year.”

He said historically high interest rates coupled with cap on financing of Rs3 million and above by the State Bank of Pakistan is also killing demand.