Challenges Return for Imported Used Cars

Jawad

11 Sep 2023

314

Challenges Return for Imported Used Cars

Auto Industry Under Fire:

Pakistan's auto industry and its major stakeholders are once again expressing their concerns about the surge in used car imports. This follows a recent outburst from the Chief of Indus Motor Company (IMC), and now, local parts manufacturers are taking action to voice their frustration over the situation.

Parts Suppliers in Crisis:

Auto parts suppliers in Pakistan, who had made substantial investments in localization and the importation of robots in anticipation of the growth in the domestic auto industry, are grappling with an unstable economic environment exacerbated by the influx of used car imports. This influx poses a threat to their businesses and workforce.

Investments and Economic Challenges:

These suppliers had made significant investments ahead of Toyota plans to launch the country's first hybrid electric vehicle (HEV) and other models. However, the recent liberalized policy on used car imports by the government has hit them hard. Despite a sharp reduction in production, which is currently operating at around 30% compared to over 100% capacity utilization earlier in 2022, they have managed to retain their workforce. and other models. However, the recent liberalized policy on used car imports by the government has hit them hard. Despite a sharp reduction in production, which is currently operating at around 30% compared to over 100% capacity utilization earlier in 2022, they have managed to retain their workforce.

The Hybrid Misconception:

Local media often refers to the upcoming Toyota Corolla Cross as Pakistan's first hybrid, overlooking Sazgar's locally assembled Haval H6 hybrid, which rolled off the assembly lines in November 2022. While the Corolla Cross is not Pakistan's first hybrid, it is poised to be the first from the Big 3 automakers.

Industry in Turmoil:

During FY2023, auto original equipment manufacturers (OEMs) experienced a 55% decline in volume due to weak demand, rapid inflation, and higher taxes. Auto parts manufacturers have seen their production shrink to less than 30% of the previous levels. According to Mohsin Siddiqui, General Manager of Plant at Agriauto, "We manufacture 459 dies and 155 parts for the auto industry, and we invested billions of rupees from 2019 to 2023. However, due to the current issues facing the industry, our production has plummeted to less than 30% from 140%." He also noted that imported used cars now command a 25% market share.

Looking Beyond Blame:

Instead of solely blaming the limited number of used car imports, local industry stakeholders must acknowledge that consumers opt for used cars due to perceived flaws in locally assembled vehicles. These flaws include overpriced cars, questionable build quality, lack of features, and safety equipment, as well as lengthy delivery times with hefty premiums. It's essential for stakeholders to address these issues and not simply point fingers at used car imports, which make up only a small fraction of the market.

A Call for Industry Improvement:

To truly enhance the auto industry, both local stakeholders and the government must collaborate on comprehensive plans. Despite being the world's fifth most populous nation, Pakistan's vehicle production hovers around the 200,000-unit mark annually due to a market dominated by a few players, limited choices, and unchecked capacity utilization, which maintains a demand-supply gap.

Conclusion:

It's evident that consumers will opt for used cars only if quality options at reasonable prices with quicker deliveries are unavailable. It's time for industry stakeholders to address the fundamental issues and work toward a more robust and consumer-friendly auto sector.