Gloomy picture of car sales in Pakistan and India has coerced leading automakers to rethink about bulk productions. Car manufacturers in the subcontinent are facing tough times as charts show an immensely scary economic situation ahead. Waning auto sales may have a significant effect on jobs as well.
Devaluation of Pakistani currency and imposition of federal excise duty in the budget have raised prices, forcing auto sales to dip further in the country. Auto sales have plunged by seven percent in last fiscal year and predictions are that it would be more than double in the next FY.
Honda and Toyota have slashed their production to clear the inventories in the market. Honda Atlas Cars Pakistan had to suspend its manufacturing unit for this reason for 12 days the following month. Indus Motors, which produces Toyota vehicles in Pakistan, has reduced its production to five days per week. While, Pak Suzuki Motor has no plan to cut its production size as it hopes to capitalize from the restrictions on import of used cars.
There is a visible fear in the market that job losses are imminent but the exact size could not be foretold. The original equipment manufacturers are cogitating to downsize temporary employees.
According to a Business Recorder report, CEO of KIA Lucky Motors Pakistan Asif Rizvi told that around 0.33 million cars were bought in Pakistan in 2018, which had dropped to 0.28 million units the following year.
“That means that 1.65 cars were sold per 1000 people in 2018 in the country. Globally, 97 million units were sold. The global average is 12.4 per 1000 people. If one applies that average to Pakistan, we should be selling 2.5 million cars every year, which after applying a correction for per capita incomes would be around 500,000 cars. We are selling much less,” he said.
He said on the other hand India was selling four cars per 1000 persons and if that ratio was applied to Pakistan with per capita it again make 0.45 million cars a year.
“Take yet another example, this time of Indonesia, whose population mirrors Pakistan. Nearly 12 years ago, Indonesia’s per capita income was $1650 and the country sold 330,000 cars. In 2018, our per capita income was about the same and we sold the same number of cars. Now 12 years later, Indonesia sells 1.2 million cars. My analysis here is that, in 10 years’ time, we should be selling at least a million cars,” he said.
Suzuki, Honda, Tata, Nissan shut down production units in India
As a result of liquidity crunch and weak buying power vehicular sales in India has slumped drastically forcing international car and motorbike manufacturing companies to shut down their production units in the country.
Automakers of the neighbouring country are in deep despair as they had very slim sales over the period of last one year. According to an ET Auto report, there were about five lakhs four-wheeler vehicles worth five billion dollars (about Rs805, 000, 000, 000) lying unsold with dealerships; while, 30 lakhs bikes worth 2.5 billion dollar (about Rs402,500,000,000) were waiting to be sold with dealerships in June.
In a bid to deal with the rising stocks of vehicles, the companies had shut production plants for different periods. This began with Maruti Suzuki, Mahindra and Tata Motors suspending productions in May this year.
Tata Motors’ Sanand plant remained closed from May 27 to June 3, while the production unit of Honda Cars India was shut from June 5 to 8. Renault Nissan and Skoda Auto also plan to shut down their production units for scheduled maintenance.
The automakers believe that by shutting down their plants they would be able to clear the unsold inventory from markets, but the same may also affect the sales target. These shutdown may cut combined sales up to 25 percent in May-June.
Tata car manufacturers held the recently-held general elections as responsible for the sales drop.
Most of the leading vehicle producers in India have slashed their production.