Car Manufacturers/Assemblers May Exit Pakistan

Some car manufacturers/assemblers are planning to leave Pakistan. The decision has been made after considering the immense difficulties automotive industry is experiencing.

Due to the economic uncertainties and political conditions automotive industry is facing various challenges in terms of revenue and growth. In management briefing, Indus motors stated that the automotive industry is facing unexpected external issues. The issues include the unprecedented rupee devaluation and import restrictions by SBP. Additionally he said, some players may exit from the market, reported by Topline Securities.

In a Corporate Briefing Session, Indus motors review the fisrt quarter financial results and company forecast fro the current fiscal year. Due to the limits imposed by SBP, INDU is now operating at 40-50% of its maximum capacity. Whereas, the management does not expect this to change very soon.

At current production level, INDU’s order book is full for the next three months. If the SBP give ease in restriction then purchases will be easily delivered within 4-5 weeks.

Furthermore,greater inflation and low consumer purchasing power have impacted so badly on overall auto sector. Due to the rising interest rates and shorter loan terms, auto finance has dropped from 35% to 10%. According to the management, the localization rate in terms of value for Yaris and Corolla is 656% after excluding 39% taxes and duties.

In response to the recently announced refund policy, management reported that nearly 400-500 consumers cancelled their bookings. Not only this, but they got their cash back plus interest amounts. A US $100 million investment plan for local manufacturers of HEV vehicles is in process. However, the company is planning to launch its variant by end of year 2023.

Pakistan car sales down 51% year on year to 47,178 units in 1QFY23 with INDU sales down 52% year on year to 8,994 units. Whereas, used car imports clocked in at 1,039 units in 1QFY23. according to the analysis, net sales 1QFY23 down 43% to 37billion from Rs 66billion in 1QFY22. SBP has limited the imports therefore, it impacted the industry badly. Likewise, profit after tax also down by 76% year on year to Rs 1.3 billion from Rs 5.4 billion primarily due to gross loss.

INDU posted a 6% gross loss in 1QFY23 compared to an 11% profit in 1QFY22 due to rupee depreciation versus the US currency, increased freight charges, and higher commodity prices. The management stated that there will be a loss in 2QFY23, but it would be less severe than in 1QFY23.

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