The automobile industry of Pakistan is on the verge of collapse due to plunging sales of even the hottest-selling models of various auto manufacturers. Due to a sharp decline in the value of Pakistani Rupee against the US dollar, the prices of all the automobiles have sky-rocketed insanely in no time what so ever. The existing auto players are struggling to sell their vehicles, whereas the new entrants are finding themselves in an uncertain situation as they entered with long-term investment plans in the local industry. The government worsened the situation by implementing new additional taxes and duties on the locally produced vehicles, thus raising the prices even further. The buying power of the consumers has gone down the hill, and surprisingly, the entry-level hatchbacks in Pakistan now cost more than Rs.1 million.
Pak Suzuki, Honda Atlas, and Toyota Indus are the leading auto manufacturers in the country along with a few new entrants paving their way through. The statistics for the last five fiscal years suggest that the climbing trend of car sales has suddenly seen a steep downward movement in the fiscal year 2019-20. And more surprisingly, we are discussing the top-selling models in the local market including Suzuki Wagon R, Honda City/Civic, and Toyota Corolla. Things have changed drastically for these models, and the companies are forced to reduce their production as they are struggling to clear the piled-up inventories. Until last year, Wagon R was selling like hot cakes in the market but not the case anymore. Its sales have gone down by a massive 71.50% in the first two months of the fiscal year 2019-20 as compared to its corresponding period last year. The company sold 5222 units in these two months during 2018-19 but this fiscal year has kicked off with only 1488 units in the space of 60 days. If we go back further in the past, Suzuki managed to sell 1184 units in 2015-16, and the sales started to rise with each passing year. In 2016-17, the sales figure went up to 2352 units whereas it increased to 4137 units during 2017-18. It means that every fiscal year started with a significant rise in sales of the hatchback until 2019-20. One of the reasons behind its declining sales is the launch of the all-new 660 cc Alto. Pak Suzuki has sold a whopping 8019 units of Alto in the first two months of FY 2019-20. It indicates that the sales of Wagon R have shifted to Alto, which is also equipped with more features but comes with a 660 cc engine. The price of Alto starts at Rs.1.135 million and goes up to nearly Rs.1.433 million. On the other hand, even the base variant of Wagon R comes in Rs.1.54 million. The imposition of 2.5% Federal Excise Duty (FED) on Wagon R also jacked up its price considerably, which left the consumers in disarray.
On the other hand, Honda Atlas is also struggling in its sales of City and Civic. Note here that the company doesn’t reveal the individual sales stats for both its sedans. Together, in 2019-20 the automaker has sold only 3708 units in the period under review as compared to 8078 units in the previous year recording a plunge of 68.33%. The sales of these two models have also been on the rise since 2015-16 when its 4183 units were sold. In the next year, the company sold 5295 units and continued the upward trend and sold 7765 units in 2017-18. Honda City is also no more under the Rs.2 million price tag, and its price starts from Rs.2.3 million for the base 1.3L variant. Honda Civic also comes at a starting price of Rs.3.5 million in the local market. The implementation of 5% FED on both these cars has once again played its role in putting an extra burden on the prices.
The most popular model of Toyota Indus in Pakistan remains Corolla which comes under several variants with different engine power. For the past five years, Toyota managed to sell more than 8000 units consistently during the month of July and August together. However, during the same period in 2019-20, the Japanese auto manufacturer not only failed to make it to 8000 units but couldn’t even achieve half of this number. The company sold only 3708 units, thus recording a decline of massive 57.71%. The starting price of Toyota Corolla in the market is currently Rs.2.5 million and goes all the way up to Rs.3.7 million for the 1.8L Altis Grande CVT.
The above-mentioned stats show that the trend of buying cars in the country has declined immensely due to the high prices of cars and low buying power of the consumers. Honda and Toyota both reduced its production in the last two months. The companies are failing to clear their inventories before they manufacture new units. Pak Suzuki, however, announced that the company would not reduce its production. Perhaps it was just about a matter of days before the company notified its authorized dealerships to temporarily suspend the bookings of some of its models with immediate effect. These models include:
- Swift DLX
- Mega Carry (permanently discontinued)
- Vitara
- Cultus VXR
- Alto VX
- Wagon R VXR
Surprisingly, Alto is also among the list for its VX variant which has just launched a few months ago. Overall, the car is performing quite well in terms of sales, as we mentioned earlier. The base variants of Wagon R and Cultus are also among the suspended vehicles under three colors, i.e. red, blue and black.
The government should play its part in this situation as soon as possible. The new players are entering the industry, and there is a need for consistent policies from the government to help them gain market share. In a situation which is already devastating for the existing auto manufacturers, the future of new entrants looks even darker. KIA launched the mid-sized hatchback Picanto in the local market a few days ago. The company would need confidence in the market to become a successful entrant in Pakistan. The sharp and record devaluation of Rupee against the US dollar has already left the country’s economy in massive suffering. In this situation, the government needs to waive off the additional duties and taxes such as FED from the cars to revive the industry. It will help grow sales and bringing back the lost confidence in the auto market.
How do you see the future of the automobile industry of Pakistan? Drop your valuable thoughts in the comments space below.
