Auto Industry Starts to collapse
  Sep 05, 2023     talha seo  

Auto Industry Starts to collapse

A number of factors, including rising auto prices, rising interest rates, limits on auto financing, restrictions on the import of CKD parts, and the current political and economic unrest, have made things difficult for local auto assemblers. As a result, the majority of them are now providing customers with faster deliveries, price reductions, and a variety of packages to win their business.

One could ask how assemblers are able to deliver comparably more quickly under these more demanding working conditions when, in their heyday, they still had trouble meeting deadlines for automobiles. The basic explanation is that people's declining buying power and their lack of desire to spend a significant sum of money on the purchase of new cars are the main causes of the demand decline.

Second, stockholders (hoarders) who anticipated the unrest are now hurriedly selling their holdings. Mashood Ali Khan, a former leader of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), stated earlier this year that "own money" was booming and that investors were very active because of the increasing demand for automobiles. But now that demand has slowed, investors are selling cars for less than they were originally invoiced for by giving discounts.

Most assemblers are currently providing various incentives & price reductions in addition to faster delivery in order to empty their inventories. Sohail Usman, CEO of Prince DFSK, said that his business has reduced the cost of the 800cc Prince Pearl hatchback by Rs200,000 and the Glory 580 Pro crossover SUV by Rs300,000. These vehicles are expected to be delivered within 30 days, and the revised pricing is valid until December 31. Added Sohail:

“Cash purchasers are becoming more prevalent in the vehicle industry than those who choose bank-based auto finance”.

He continued by saying that reservations were declining as a result of the State Bank's efforts to limit vehicle lending, raise interest rates, and safeguard the weak currency rate. According to Sohail, the proportion of bank-leased automobiles in overall sales has decreased from 30 to 40% to only 5 to 10%.

Sohail Usman asserted that the State Bank of Pakistan was favoring large Japanese assemblers over other businesses with its quota for establishing letters of credit for imported parts. He was also concerned about the increase in interest rates since he thought it may cause a surge in the number of clients who missed payments.

The price of various Kia Sportage models was reduced by up to Rs 251,000 by Lucky Motor Company (LMC) during the month of October. Additionally, the company is now providing a 40% discount on after-sales services, with free pick-up and delivery available to customers who want to bring their cars in for maintenance between November 20 and 30. The Kia Picanto automatic is now being delivered after full payment in a month, while the manual variant is available for delivery right away after full payment. While reservations for the Sorento 2.4FWD model are now stopped, the 2.4 AWD and 3.5FWD models are still easily available, and the Stonic and Sportage models are ready for delivery upon full payment.

According to a Hyundai Nishat dealer, the Hyundai Tucson AWD is eligible for free registration through December 31. This represents a savings of up to Rs200,000. Given the present slump in the vehicle industry, he continued, "This advantage can be dubbed a package or price discount for customers."

All Suzuki models will be delivered within 2 to 3 weeks if reservations are made by December 31, although certain models would take 4 to 5 weeks to arrive, according to Shafiq Ahmed Shaikh, Pak Suzuki's head of public relations. The availability of finances for imports will, however, determine the supply schedule for the next year, he noted. Shafiq claimed that Pak Suzuki is now providing a variety of incentive programs to increase sales. With various incentives provided to their consumers, other assemblers including Honda, Toyota, Proton, and Changan are also pledging to make early deliveries.

Only 39,700 vehicles were sold in 4M-FY23, a horrible 47% decrease from the 74,952 units sold in the same period of the previous fiscal year, which is a terrible sign for Pakistan's auto industry. The sales numbers of new automobiles are anticipated to remain unremarkable in the upcoming months, given the existing circumstances.

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