Auto industry witnesses massive drop in sales

Players in the auto industry predict a 30% decline in sales in 2022–2023 due to uncertainty

following the increase in withholding tax on filers and non-filers, the imposition of a 1% capital value tax on vehicles over 1,300cc, strict auto financing regulations to reduce demand, high interest rates, and potential future price shocks. 

According to market sources, assemblers are also using force to increase vehicle prices after Eidul Azha in order to pass along the effects of the ongoing devaluation of the rupee against the dollar and the high cost of shipping. Many have emphasised that the industry is currently experiencing a crisis. 

Before Lucky Motor Corporation Limited (LMCL) on May 20 for the Picanto Automatic

Sportage, and before Pak Suzuki Motor Company Limited (PSMCL) on July 1, Indus Motor Company (IMC) had already stopped accepting advance reservations for automobiles. 

Due to the impending currency crisis and the SBP’s decision to forbid the opening of letters of credit (LCs) for the import of parts and accessories beginning on May 20, 2022, the assemblers made these decisions. 

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Due to growing gasoline prices, SBP’s limits on creating LCs for auto parts, and new levies that went into effect on July 1st, IMC CEO Ali Asghar Jamali predicts that vehicle sales would decline by at least 30% in FY23. 

Mr. Jamali stated, “We have to jack up rates,” when asked about the likelihood of a price hike following Eid. No other option.” 

Assemblers are currently happy about thousands of advance booking orders for cars, jeeps, SUVs, and pickups made a few months ago and would be delivered in the next few months. However, the impact of increase in various taxes, soaring interest rates, vehicle prices, high petrol and diesel prices, LC restrictions, and reduction in consumer financing tenure will be visible in September 2022 vehicle sales data, according to auto industry insiders. 

IMC’s car financing accounts for about 26% of overall sales, whilst Pak Suzuki’s consumer financing accounts for 35% of total sales.

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