Where is a backup plan while car sales are declining?
  Sep 04, 2023     talha seo  

Where is a backup plan while car sales are declining?

Due to the lack of CKD kits on available, sales of locally manufactured automobiles continue to plummet, as was to be expected. Due to limitations put in place by the State Bank of Pakistan (SBP) on non-essential imports, the majority of players, including the biggest and oldest assembler in the nation, Pak Suzuki, are required to observe non-production days.

Remember that in its circular No. 09 of 2022, dated May 20, 2022, SBP established a system for prior permission for imports falling within the HS code 8703 category (including CKDs). These limitations have a negative effect on the import consignment clearance, which has an influence on inventory levels. However, the circumstance has severely revealed the high localization claims frequently made by regional assemblers. Because even the most basic and unsophisticated automobiles on the market are entirely dependent on foreign parts and components.

Sales of domestically produced automobiles are declining quickly, with key companies already seeing a fall, after recording record figures at the beginning of current calendar year due to the presence of several investors (scalpers) in the industry. The results show that Pak Suzuki's production fell by 42% month over month while Toyota and Honda's output were reduced by 14% and 19%, respectively. It seems likely that this terrible scenario will persist in the coming months.

The concern is: Will the local assemblers simply "wait" for things to become better, or is there a backup plan? How long can they continue operating with so many days where no product is produced. And if the prohibitions on the import of CKD components persist, would they eventually decide to dig in their heels and encourage the neighborhood merchants to make the necessary parts for them?

The local car sector has depended on imports for many years. We are still a long way from achieving that level, despite the fact that regional markets with car factories have been exporting the automobiles to many other regions of the world.

Additionally, the fact that we lag far behind the rest of the world in terms of technology, safety, emissions, and quality regulations for vehicles is cause for alarm. For instance, even after the Euro-2 standard was rendered obsolete in the rest of the world 22 years ago, we continued to produce automobiles that met it. Nowadays, just 2 airbags are standard on the majority of costly (locally produced) automobiles on the market, compared to 6–8 airbags in other areas of the world. Additionally, there is no testing equipment to determine if automobiles are crashworthy.

Since even emerging economies like Vietnam and markets in Africa have outperformed us in the car sector by a significant margin, it is clear that nothing that is being built here can ever be exported to any part of the world. And despite spending more than three decades on it, the local auto industry is still unable to create even the most basic cars, like the Bolan & Ravi, which are more over forty years old.

The government should be concerned since they have been providing several incentives to the assemblers ever since. How many more years will the local economy be dependent on imports? And when even four-decade-old vehicles cannot be built locally, strong localization claims are scrutinized. In addition to bragging about creating locally "everything that can be touched and felt," local assemblers and parts producers should now start producing things that we cannot touch and feel in order to localize the necessary content. After all, 2022 is coming to a close.

talha seo