The PAMA (Pakistan Automotive Manufacturers Association) has published the information about the production and sales of the automotive industry for April, which makes for shocking reading. The Pakistani automobile industry didn’t sell a single car in April because of a country-wide lockdown the government enforced to prevent coronavirus spread. Barring tractors proved to be one of the worst months for the entire auto sector as car production and sales reduced to zero. No car sold because of coronavirus.
The overall car production and sales during 10MFY20 plunged by 52 per cent year-on-year each to 88,628 and 86,330 units. Meanwhile, there was no production of heavy vehicles (buses & trucks) in April, but data from the Pakistan Automotive Manufacturers Association (Pama) mentioned negligible sales of some assemblers.
Some manufacturers also posted marginal sales in light commercial vehicles, pickups, and jeeps during April despite nil production. According to one official at Pakistan Automotive Manufacturers Association, no single car was produced or sold in April. I have never witnessed zero sales and production in auto history for a whole month, and the situation looks the same for May, which is alarming for the auto companies.” The overall car sales have down by 52% during the first ten months of the current fiscal year, on a year-on-year basis to 86,330 units.
Honda has seen the most critical slump with its car sold falling by a staggering 64% every year in this time frame, followed by Indus Motors, who have seen their sales decline by 54% yearly. Pak Suzuki company has seen its sales decline by 47% every year. “With the easing of lockdowns in the country effective May 11, we expect sales to resume for the last two weeks of May,” IMS said. It, however, added the sales are expecting to pick up in the first half of 2021. It is because Indus Motor Company, the makers of Toyota in Pakistan, and Honda Car Pakistan Limited increased prices recently, and Pak Suzuki Motor Company is likely to follow suit. But analysts at IMS also said the reduction of more than 4% in interest rates might help auto-financing pick up earlier than expected.
What’re the Reasons the Sales Have Gone to Zero?
There are many ways of looking at it for a car to count as sold it wants to deliver to the customer, meaning that if a person has booked their car and even paid the full amount, it won’t count as sold unless it has delivered. Some cars were supposed to be given this month. Due to the provincial and federal governments imposing a lockdown, the auto companies have to stop all operations, including all deliveries. They also transferred over to the production side, and no car was produce or no car sold in April. They are sales, but they show decreased sales every year while Atlas Honda shows over two thousand bike sales, but they also show a decline every year.
The many other factors are that over the past year, there has a steady decline in the sales of cars due to several factors such as the prevailing economic conditions, car makers increasing their prices, and the government trying to improve the tax net. These two are the significant factors behind the sales going down to zero.
What’s Next for the Car Industry?
We talk about how the corona pandemic would impact the local auto industry. According to Pakistan Automotive Manufacturers Association officials, the production and sales figures for May could resemble those in April, which could have a devastating impact on the industry. We have already seen various car makers such as Toyota and Honda, increasing their cars’ prices due to the rupee’s devaluation. Now with no car sold or production, they will have to raise their rates again, which could potentially way to further decrease in sales once the lockdown ends.
On the business side of things, they could order to lay off part of their workforce to save costs. There were already discuss an industry-wide bailout, and these numbers could only intensify the chances. One other thing that has gone mostly unnoticed in all this is how this will impact the new entrants such as Hyundai, who have just launched their new cars and BAIC who were looking to enter the market later this year.
While both companies wouldn’t have the numbers to compete against the established carmakers in a world free from the coronavirus with sales and production already halted, it will be challenging to get going. It will affect other future potential investors. There are testing times before for the local auto companies, and it will be tough to navigate through these rough waters.
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