Arooj Zulfiqar

Pakistan’s auto industry faced significant challenges during the July-May period of FY24 as car production and sales decreased by 26.6% and 22.8%, respectively, according to the monthly economic outlook for June 2024, reports WealthPK.

Abdul Waheed Khan, a senior representative of the Pakistan Automotive Manufacturers Association (PAMA), emphasised the significance of the automobile sector in contributing to Pakistan's economy by generating employment opportunities and contributing to the country's GDP. “However, a significant downturn in car production and sales reflects a complex interplay of economic challenges that have been brewing for some time,” he said. “Economic indicators, particularly inflation, has been a major contributing factor.”  “Economic instability, marked by rising inflation rates, has severely impacted consumer purchasing power. The cost of living has increased, leaving less disposable income for non-essential expenditures, such as purchasing new vehicles,” he explained. He said, “A comprehensive solution is required which must involve monetary policies to curb inflation and stabilise the currency. The government must work towards achieving economic stability, possibly through fiscal reforms and prudent monetary management.”

“Another critical factor affecting car production is the increase in input costs. The auto industry heavily relies on imported raw materials, and the depreciation of the rupee against major currencies has exacerbated the cost burden,” he added. Waheed said, “The cost of production has skyrocketed due to the increased prices of raw materials and components. This has forced many manufacturers to scale back production to manage expenses.”  “Supply chain disruptions, partly due to global logistical challenges and local economic conditions, have also played a role. Delays in the arrival of essential components have led to production slowdowns,” he said. “In response to these challenges, the auto industry is seeking policy interventions to stabilise the situation. We need supportive policies from the government, including tax reliefs and incentives for local manufacturing. Additionally, improving the overall economic environment will be crucial for recovery,” Waheed said.

Credit: INP-WealthPk