International auto giants hold massive investments in Pakistan due crisis in Pakistan auto sector

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International auto giants hold massive investments in Pakistan due crisis in Pakistan auto sector

ISLAMABAD - Cumulatively, commercial vehicles and tractors have declined so far in four months ending Oct-19 by 44 percent with a massive drop witnessed in pickups (down 55%), with nominal declines in trucks and buses.

But truck sales had already dropped 40 percent in FY19 year on year. They are now trailing their lowest points in history. Imports in completely built units (CBU) have dropped by 75 percent in Jul-Sep 2019 period against the corresponding period last year. Since, most manufacturers use CKD kits to locally assemble units, another important number is CKD imports for trucks and commercial vehicles where the decline is 41 percent. This directly feeds into production and the decline is testament of falling demand.

On the other hand however are several Chinese companies (Chinese Forland, Joylong, Changan or the likes of Daimler AG and Mercedes Benz) still planning to enter the now shrinking market for commercial vehicles hoping to grab a share including South Korean Kia and Hyundai and the latest addition in the list Malaysia Proton coming into partnership with Al-Hajj FAW.

Though many of the plans to launch commercial vehicles are still not due until FY21 which may set a positive spin to the economy at large, and commercial activity in particular.

Rising commercial vehicle sales can indicate the level of economy activity in the country. Substantial declines mean commercial activity has slowed down and new growth is not taking place. Freight forwarders, transporters, and logistic companies are not finding reason to expand or replenish their fleet and new players are not entering the market. This is intuitive.

Purchasing powers have reduced which is leading to reduced consumption in the economy which is currently being replaced by savings and investments. Production as a result is also declining which in turn translates to less transportation.

Macro-stability will remain the biggest concern for the sector going forward as demand recovery depends on it.