Pakistan Automobile Industry

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Pakistan's auto sector fears massive lay-offs if LC issue persists​

Bilal Hussain
February 27, 2023

Several auto companies have regularly announced shutdowns and some of them say it will be difficult to sustain the present level of workforce amid the Letter of Credit issues.

A key official of a listed car company said on Monday that it was getting difficult to sustain the present level of the workforce even as car companies regularly increase prices.

“If this (issue) persists, there will be massive layoffs across Pakistan,” the official, on condition of anonymity, told Business Recorder.

“We are trying to retain the workforce for as long as possible. But we will not be able to hold this position for very long,” he said.

Many sectors, including the auto sector, are facing difficulty in importing parts and raw materials as the country struggles with low foreign exchange reserves.

The State Bank’s reserves currently stand at around $3.26 billion as on February 17, 2023, and hardly enough to cover 20 days of imports. However, they are likely to get a boost as an inflow from China Development Bank gets deposited.

Pakistan’s auto industry, highly dependent on imports, has been caught in the midst of a crisis, as the SBP, after unabated rupee depreciation, imposed restrictions on the opening of LCs.

“We are also keeping our factories shut for a few days in a week due to lack of demand from OEMs,” said Munir K. Bana, Chairman Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM). “We send our workers home and pay them half their wages.

“We are trying to keep things rolling for everyone for as long as possible,” he said.

In January 2023, automobile sales in Pakistan fell to the lowest level since June 2020 as it witnessed a drop of 36% month-on-month to 10,867 units, according to PAMA data. On a year-on-year basis, car sales fell 47%.

However, a Pakistan Automotive Manufacturers Association (PAMA) official said that there was no layoff from the OEM (Original Equipment Manufacturers) side so far.

Another official of a car company said that they were observing the situation and would take a decision after seeing how the situation unfolds.

Since December alone, over 14 listed companies including major auto companies such as Suzuki and Toyota and Sazgar have announced scaling back or shutting down operations citing varying reasons including inability to obtain LCs, supply chain disruptions, inventory shortages, drop in demand and energy shortage.

 

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Karachi 1959,
PIA buses used to carry passengers to and from Airport.

 

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Karachi Car Rally , 1981..

 

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Karachi Car Rally , 1981..

I can probably recognize most of the car model in that picture.

 

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Karachi, 1960's ....

 

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“Not A Vintage Auto Show.” The Parking at Mall Road, Lahore.
Year: c1970s.
Source: Lahore - City of Gardens

 

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Ad from 1978 ...

 

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Auto sales suffer massive fall of 66% YoY to 9,211 units in March​

• Non-availability of CKD kits, escalating prices, expensive auto financing drive decline on a yearly basis
• Sales are, however, higher on a monthly basis

 

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Auto sector's localisation discrepancies​

Aamir Shafaat Khan
April 25, 2023

Many countries, including India, have been trying to make in-road in the rising demand for electric vehicles (EVs). Meanwhile, in Pakistan, headlines blare the meteoric rises in car and bike prices due to the high landed cost of imported parts owing to rupee depreciation and low localisation.

The issue of localisation is so complex that it is hard to judge it by the value of imported parts or by the number of parts in vehicles. Despite claiming higher localisation, assemblers have been giving multiple shocks in a month, citing rising raw material prices on account of the rupee’s fall against the dollar.

No serious efforts have been made towards localising hi-tech engine parts as stakeholders focused more on cosmetic changes in the designs of bumpers and grills in the name of new models.

A renowned financial consultancy firm hired by the Pakistan Association of Parts and Accessories Manufacturers (PAAPAM) has stated that car prices have jumped by 100-149 per cent in the last five years despite the 71pc rupee devaluation and the rise in parts’ prices by 33pc to 112pc.

For example, as per the firm’s presentation, Toyota Altis 1.6 price saw a jump of 149pc during 2019-2023 while forging parts prices rose by 91pc after remaining unchanged from 2019-2023.

A policy needs to be devised to increase the localisation of parts to help the vendors’ businesses and improve the current account deficit

The iconic Honda CD-70 bike, which its manufacturer/vendors claim has achieved 96pc localisation, recorded a price jump of 65pc from 2019-2023 as against a hike in forging and rubber parts of 84pc and 72pc, while the rupee shed value by 71pc.

However, CEO Indus Motor Company Ali Asghar Jamali said, “I am shocked and surprised over the misleading data. Too bad, vendors should have checked the data of the presentation.”

An executive in Pak Suzuki Motor Company Limited said parts vendors’ claim does not seem correct as assemblers, specially Pak Suzuki, has fair price management mechanism in which the majority of things such as forex, national and international raw material, and other materials cost, utilities, overheads, labour rates are periodically transferred to all suppliers uniformly.

Vehicle and parts manufacturers are working hard to improve and restart normal businesses in this crucial time prevailing since last year. “I do not know where and how these isolated studies come out. It is better that if any party has an issue, they can sit jointly and resolve the matter,” he added.

In an analyst briefing of Pak Suzuki held in May 2022, Top Line Securities said that Swift’s localisation had reached 35pc, Cultus 51pc, Wagon-R 60pc, Alto 62pc, Bolan 72pc and Ravi 68pc.

Allowing new entrants to assemble vehicles with low localisation rates has taken up the country’s import bill to $4.7 billion for import of completely knocked down (CKD) kits in the last five to six years.

General Manager of Marketing and Sales, MG Motors, Asif Ahmed, said the new entrants need to match the localisation levels of existing players otherwise their prices will remain high compared to old players in future.

New entrants roll out locally assembled vehicles while paying 10pc import duty on CKD kits. As per government policy, they will have to gradually increase the presence of local parts over their five-year concessionary tenure. Existing assemblers make vehicles while paying 35-40 per cent CKD duty, he said.

“I believe that localisation should be hi-tech rather than low-tech. Our company believes in using locally made parts and cars for exports,” he said.

MG started the assembly of MG HS vehicles at a plant in Lahore some four months back. He said the company would focus on bringing localisation at par with existing competitors in the next four years.

CEO of Baluchistan Wheels Limited Irfan Ghani, claims that auto assemblers have not localised parts in the last five years. As a result, consumers will continue to pay high prices for vehicles because of exchange rate parity on imported parts.

He claimed that the local parts content in Alto is 30-35pc while Suzuki Swift is being rolled out with 20pc local parts. Decades-old Suzuki Ravi and Bolan have 50pc local parts.

The government should impose a heavy fine on those assemblers who can make parts with the help of vendors but prefer to import, he added.

Auto part maker/exporter Mashood Ali Khan said low localisation is certainly one of the main reasons for the continuous price increases.

Whatever deletion occurred, it was only because of the deletion programme of the government. After replacing the deletion program with the Tariff Base System (TBS), the government’s objective of deletion could not get the results of higher localisation.

He said the government must carefully chart out a road map for the auto sector. Industrial raw materials must be locally produced, enabling vendors to make parts at a lower cost. This is a more realistic way to control prices. “In Pakistan, we have no vision from the government and the Engineering Development Board,” he added.

Another vendor said that the government needs to bring major changes to the Auto Industry Development and Export Plan (AIDEP) 2022-2026, making it mandatory for assemblers to export a certain percentage of vehicles and parts. He demanded the execution of the deletion programs in letter and spirit with monitoring mechanisms be brought back through amendments in AIDEP.

PAAPAM’s consultant presentation asked the vendors to urge the assemblers to increase their prices with the same frequency, timing and percentage that the assemblers do for their own products. The payment pattern should be the same as the original equipment manufacturers follow for their own customers. A material bank needs to be created to provide vendors with materials for production.

There is a need to devise a policy to increase the localisation of automobile parts to help the vendors’ businesses and improve the current account deficit.

 

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Auto sales drop by over 80pc in April​

Aamir Shafaat Khan
May 12, 2023

Sales of cars, light commercial vehicles, jeeps and vans plunged by over 80 per cent year-on-year (YoY) to 4,463 units in April amid growing economic and political uncertainties.

As a result, the sales halved to 114,868 units in the first 10 months of the current fiscal year compared to 227,995 units in the same period last fiscal year. On month-on-month (MoM), the sales stood lower by 52pc in April.

It was the lowest monthly sales in the above categories since May 2020 Covid-19 lockdown.

Higher prices, dwindling auto financing on account of high soaring interest rates, high petroleum prices, plant shutdowns due to parts shortage owing to import curbs and delay in delivery of vehicles to the customers were the main reasons for the continuous downward trend in the auto sales.

As per analysis based on the data of Pakistan Automotive Manufacturers Association (PAMA), Toyota Corolla and Yaris sales in April stood at 1,007 units, showing a fall of 10pc MoM and 76pc YoY. Sales of both these cars shrank by 64pc to 17,001 units in July-April FY23.

Toyota Fortuner and Hilux sales surged by 19pc to 941 units in April against 793 units in March. The April sales were 43pc less than the 1,658 units achieved in April. As a result, both the costly vehicle sales fell by 27pc in 10MFY23 10,539 units.

Sales of Honda Civic/City nosedived by 74pc in April to 159 units from 611 units in March while it contracted by 93pc if compared with 2,265 units in April 2022. Total sales of these vehicles in 10MFY23 witnessed a drop of 57pc to 12,540 from 29,095 units.

Honda BR-V sales in 10MFY23 grew by 11pc to 3,945 from 3,544 units in the same period last fiscal despite a 79pc drop in April to 48 units versus 224 units in March. In April 2023, BR-V sales stood at 364 units.

Negative sales trend continued to prevail in Suzuki Cultus, WagonR, Alto, Bolan and Ravi which fell by 67pc, 73pc, 46pc, 61pc and 72pc to 6,410, 5,121, 31,564, 4,028 and 3,544 units in July-April FY23 from 19,431, 18,739, 58,250, 10,422 and 12,446 units in the same period of 10MFY22.

Suzuki Swift sales plunged by 83pc to 145 units in April from 877 units in March, while 10MFY23 sales swelled to 8,729 units from 2,770 in the same period last fiscal year.

Bike and tractors

Suzuki bike sales clocked in at 28,091 units, showing a rise of nine per cent from 30,998 units during 10MFY22 while Yamaha sold 11,161 as compared to 20,021 units in July-April 2021-2022, down by 44pc.

Sunny Kumar of Top Line Securities said that truck and bus sales were down 51pc MoM and 68pc YoY to 152 units in April 2023. This takes 10MFY23 sales to 3,534 units, down by 35pc YoY primarily due to a drop in transportation activity and a slowdown in the overall economy.

Al-Ghazi Tractors Ltd sold 9,463 units of farm machinery as compared to 18,340 units in 10MFY22, posting a 48pc drop while Millat Tractors also came down by 47pc to 14,981 from 28,111 units due to floods, plant shutdowns, lower consumer buying power and higher prices.

 

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The Mall, Lahore ...

 

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Karachi Saddar, 1955 ...

 

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Hinopak Motors Limited (PSX: HINO) was incorporated as a public limited company in Pakistan in 1986.
The company is engaged in the assembly, progressive manufacturing and sale of Hino buses and trucks as well as sale of its spare parts and accessories. HINO is the subsidiary of Hino Motors Limited Japan. The ultimate parent company of HINO is Toyota Motors Corporation Japan.

The company posted a net profit of Rs.417.13 million in 2022 with an NP margin of 3.3 percent. EPS clocked in at Rs.16.82 in 2022.

 

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Yutong Master assembles 500th unit of Chinese intercity bus model in Pakistan​

By Khalid Aziz
Jun 23, 2023

ISLAMABAD - Yutong Master has assembled the 500th unit of the Yutong ZK6138HP intercity bus model introduced in September 2021 in Pakistan.

In this connection, a line-off ceremony was held to celebrate the milestone, which was achieved in only 20 months, according to an update by the company.

Yutong Master is a joint venture between China's Henan-based Yutong Group and Pakistan’s Karachi-based Master Motor Corp.

Yutong Master locally assembles four models of the Yutong intercity bus family. These include intercity coaches, shuttle buses, city buses, BRT buses, school buses and recreational vehicles. These buses can be customised as per the requirements of the customers, according to Master Motor.

According to the company, Yutong bus is the market leader in Pakistan's intercity transport segment with 61% market share as of 2020-21. Currently, more than 1,600 Yutong buses are running on Pakistani roads, according to the Master Motor.

Master Motor signed a technical license agreement with Yutong in 2013 to enter into intercity bus segment of Pakistan. The first bus lined off from the plant in February 2016. By 2017-18, Yutong-Master had captured more than 49% of Pakistan’s intercity transport segment, covering all major routes of the country.