Automakers' Price Cuts Spark Debate Amidst Slowing Demand in Pakistan

Auto companies have Rs 189b advance payments

As Pakistan faces an economic crisis, the local automobile industry appears to be in a turbulent period marked by depreciation of the rupee against the US dollar, economic instability, non-issuance of Letters of Credit (LC) by the State Bank of Pakistan (SBP), and political uncertainty, among other things.

With no CKD kits in hand, the companies are cancelling bookings and halting production to observe non-production days, resulting in further delays in deliveries, while still advertising large price increases that will apply to new orders once production (assembly) resumes.

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During a recent Public Accounts Committee (PAC) hearing, the local auto sector was the topic of discussion. During the discussion, the PAC was informed that customers had placed Rs. 189 billion as an advance payment to ten vehicle businesses.

An carmaker also informed PAC that the government had asked the assemblers why they were taking so many reservations from customers if they couldn’t deliver the vehicles on schedule.

Even before the State Bank implemented import restrictions, delivery times for locally made cars ranged from 3 to 14 months, depending on the model and assembler. However, with such a large sum of money gathered in advance bookings, the assemblers must simplify their operations and ensure they have enough supply to deliver the vehicles to clients on time. Except for the Big Three, most players’ annual production is less than 25,000 units, which needs be increased to fulfil demand.

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