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Mettis Global News
Mettis Global News
Mettis Global News

MPS Preview: High for Longer

Dollar constraints, low demand: A deadly combo for car industry

Dollar constraints
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August 24, 2023 (MLN): The car industry hit the skids in July 2023, as production plummeted to a mere 5,450 units, barely above the lowest monthly figure recorded in April 2023 since the COVID-19 pandemic.

The slump was caused by a double whammy of weak demand and challenges in sourcing Completely Knocked Down (CKD) units, compounded by difficulties in making payments to foreign suppliers due to constraints on the availability of dollars, as a result, the industry faced multifaceted obstacles.

To compare, throughout 1HCY23, car production maintained an average of around 7,515 units per month, according to the data by the Pakistan Automotive Manufacturers Association (PAMA).

1HCY23
  Jan-23 Feb-23 Mar-23 Apr-23 May-23 June-23 Average
Total cars 5,723 4,708 6,011 3,740 5,093 5,331 5,101
Total Buses 62 48 42 36 27 32 41
Total Jeeps & Pick-ups 4,347 2,837 2,161 1,477 1,678 1,739 2,373
Grand Total 4 Wheelers 10,132 7,593 8,214 5,253 6,798 7,102 7,515

This contrasts starkly with the monthly average of 23,833 units during the same period in the previous year (1HCY22), showcasing a substantial decline of 68.47% YoY.

1HCY22
  Jan-23 Feb-23 Mar-23 Apr-23 May-23 June-23 Average
Total cars 18,356 18,263 22,898 18,255 19,000 22,410 19,864
Total Buses 83 46 74 61 71 70 68
Total Jeeps & Pick-ups 3,552 3,364 4,416 3,632 3,638 4,810 3,902
Grand Total 4 Wheelers 21,991 21,673 27,388 21,948 22,709 27,290 23,833

Includes Four-wheelers: cars, buses, jeeps and pick-ups

However, with the recent relaxation in import policies, the bill for car CKD imports has significantly increased.

This development is anticipated to have a positive impact on car production in August, suggesting a potential upswing in manufacturing activities.

To note, the average monthly CKD imports during 1HCY23 stood at $57.31 million, significantly lower than the monthly average of $185.52 million during the corresponding period in the previous year, as per State Bank of Pakistan (SBP) data.

Sources: SBP, PAMA, Mettis

Pakistan's imports surged to $5 billion in July, marking a 30% MoM increase amid the relaxation of import restrictions, including luxury items, and the clearance of pending payments.

Lifting the curb on imports was one of the conditions set by the IMF to secure financial aid.

During July, imports of CKD four-wheelers, including cars, buses, jeeps, and pick-ups, surged by 3.43x MoM to $117.6m as per the SBP data, and by 77% MoM to $70.6m as per Pakistan Bureau of Statistics (PBS) data.

According to SBP data, this figure represents the highest monthly import since June 2022 for the local car manufacturers.

It is worth recalling that many car assemblers had tightened their belts on production due to the non-availability of CKDs/parts, owing to the import restrictions and the tight dollar situation.

Copyright Mettis Link News

Posted on: 2023-08-24T11:49:48+05:00