Local Assemblers' Dislike for Imported Used Cars

02 Aug 2023

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Local Assemblers' Dislike for Imported Used Cars

Despite more than three decades of government support, Pakistan's auto industry, which is dominated by a few key players, remains in its infancy.

Untapped Market Potential

Despite being the fifth most populous country in the world, Pakistan's local auto industry has failed to unlock the true potential of its market. With annual vehicle production barely surpassing 250,000 units, the vehicle ownership ratio stands at a dismal 168 out of 190 countries.

Comparison to Thailand's Success

In comparison, Thailand, with a population almost three times smaller than Pakistan, rolls out 2 million units annually and exports 1 million units. Local assemblers attribute various causes for their lack of progress, often blaming imported secondhand cars.

The Real Challenges Faced

However, the lack of genuine localization, heavy reliance on imported kits & components, inefficient capacity utilization, the menace of premium/on-money, and inadequate products tailored to the right buyers are the actual impediments to the local assemblers' progress.

Misconceptions about Used Imports

Local assemblers frequently criticize used imports as a threat, but data shows that these imports primarily consist of smaller cars (1000cc or less), a market segment not directly competed with by local players, except for Pak Suzuki.

Advantages of Imported Cars

Imported cars, despite being sold without warranty or after-sales support, boast better build quality, superior specs & equipment, advanced safety systems, and up-to-date models compared to locally sold vehicles, which often lack safety features and are overpriced.

Current Industry Challenges

Sales of locally assembled cars dropped significantly in FY23 due to import restrictions by the State Bank of Pakistan, stringent car financing, and soaring car prices caused by depreciating currency value. Analysts believe that even with relaxed import restrictions, sales may remain restrained in the next few years.

The Need for a Competitive Market

The auto industry faces a long-term issue with the lack of competition. Assemblers, protected by the government, have little incentive to reduce costs, expand into the export market, or cater to the demands of Pakistani consumers, especially the middle class.

Used Imports as Healthy Competition

In the absence of genuine competition, used imports provide a healthy challenge to local manufacturers, helping keep new car prices in check. While the resentment of assemblers towards used imports is understandable, their presence serves as a source of competition and encourages progress.

Pakistan Auto Industry Import Used Cars Local Cars Assemblers Used Cars Prices in Pakistan

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