Due to the lack of inventory on hand, supply chain issues, import restrictions imposed by the State Bank of Pakistan (SBP), and strict guidelines set on the opening of letters of credit (LCs), local auto assemblers have been experiencing non-production days (NPDs) for several months as a result of the current economic crisis. As a result, the production of automobiles in Pakistan has suffered significantly.
The State Bank of Pakistan Governor Jameel Ahmed was informed by the Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) in a joint letter that the industry was on the verge of extinction because all supply lines of imported tooling, parts, and accessories are completely depleted as a result of the SBP's restrictions and banks' lack of cooperation.
The sharp decline in currency value and the global economic slowdown have both had a significant impact on commodity prices. Difficulties and inflation have significantly decreased the purchasing power of the general public, and sales of new automobiles in Pakistan have lately suffered due to tighter auto finance requirements. During the first six months of the current fiscal year, overall automobile sales decreased by 40% from the 114,774 units sold the same time the year before to just 68,900 units.
With a 35% spike seen in the last year alone, car costs have also gone mad. The majority now cannot afford regular autos due to this. For instance, the top-of-the-line Toyota Corolla is currently priced at about Rs 6.5 million, the Yaris has crossed the Rs 5.0 million mark, and the Honda Civic is approaching Rs 8.0 million. While the Cultus is now in the Rs 3.5 million price zone, hatchbacks like the Suzuki Swift have reached the Rs 4.0 million mark.
The Suzuki Alto is the least expensive mass-produced automobile and is also the most popular model in Pakistan. The 660cc Suzuki Alto is now priced between Rs 18.59 lac and Rs 24.23 lac for the base VX and top-spec AGS variants, respectively, following the most recent price rise. While the basic VX trim, which costs Rs 18.59 lac, lacks even an air conditioner and is devoid of safety features like ABS and airbags as well as alloy wheels, wheel caps, power windows, and mirrors, matching door handles, side mirrors, and a cd player, the better-equipped VXR and VXL trims are in high demand.
However, there aren't enough Alto models on the market at the moment because Suzuki is the assembler that records the highest NPDs. Customers were obliged to choose the Alto VXR/VXL over a superior vehicle that they were able to purchase (in the Rs 2.4 million price bracket) a few months ago due to the high cost of other cars.
Due to a production shortage and the resulting high market demand for Alto VXR/VXL, the vehicle is being exchanged for up to Rs 400,000 more than it is actually worth. Dealerships are requesting Rs 2.8 million for immediate delivery, and given that 90% of automobiles are sold for on-money or a premium in this market, this situation is not unique.
PAMA and PAAPAM assert that, in the absence of remedial action, this situation would result in significant unemployment, a reduction in tax income, and the closure of auto assembly factories. And since the rupee has fallen to an all-time low despite the announcement of the most recent price rise, automakers will probably boost automobile costs in Pakistan one more time.
The Suzuki Alto will ultimately see an increase in demand, but due to production reductions and a shortage of inventory at dealerships, prices are predicted to rise even more. We'll have to wait to see if the 660cc Suzuki Alto will cost more than Rs 3.0 million.