After months, once again, the local car makers start announcing production shutdowns in the face of low inventory – showcasing a new surge in invulnerability of the Pakistan auto industry these days.
This time, Indus Motor Company (IMC), a prominent player in Pakistan’s automotive industry, has recently announced a 6-day production cut from March 6 to 11. And the reason behind the move is not new – same old – pervading low inventory (auto parts and other components) and challenges posed by the disrupted supply chain causing a significant disruption in its production operations.
Expert Insights
This isn’t the first instance of IMC grappling with inventory issues over the past year. The recurrent closures of its production plant underscore the severity of the situation, prompting concerns among industry experts.
Notably, auto sector experts and analysts highlighted the adverse implications of such shutdowns on the industry’s health and called for immediate government intervention.
Experts emphasized the need for a robust industrial policy to foster growth, create jobs, and curb inflation. With the upcoming budget, he urged the government to prioritize measures that alleviate inflationary pressures and promote industrialization. They further advocated for austerity measures and strategic resource allocation to stimulate economic recovery.
Moreover, low sales compared to what observed in last two year in conjunction with 19-months consecutive drop in auto finance are the repercussions of the whole episode.
Car Financing Sees a New Decline
Pakistan’s automobile financing sector has witnessed a significant downturn, with a staggering 25.82% year-on-year drop to Rs. 246.26 billion in January 2024, compared to Rs. 331.98 billion in January 2023.
Additionally, there was a 1.98% month-on-month decrease from December 2023. These numbers, revealed by the State Bank of Pakistan (SBP), mark the 19th consecutive monthly decline in automobile financing, amounting to a total reduction of Rs. 114.29 billion.
Several factors contribute to this decline. Firstly, higher interest rates have made borrowing more expensive, discouraging potential buyers from seeking financing. Secondly, the continuous rise in car prices has made vehicles less affordable for the average consumer, further dampening demand for financing.
What’s your thoughts regarding IMC’s recent move? Tell us in the comments section.
