Once again, after several months, local car manufacturers are announcing production shutdowns due to low inventory levels – highlighting the increasing vulnerability of the Pakistan auto industry at present.
This time, Indus Motor Company (IMC), a key player in Pakistan’s automotive sector, has announced a 6-day production halt from March 6 to 11. The reason behind this decision remains the same – ongoing low inventory of auto parts and disruptions in the supply chain leading to significant production disruptions.
Insights from Experts
This isn’t the first time IMC has faced inventory challenges in the past year. The recurring shutdowns at their production plant emphasize the seriousness of the situation, raising concerns among industry experts.
Industry experts and analysts have highlighted the negative impact of these shutdowns on the industry’s health and have called for immediate government intervention.
Experts have stressed the importance of a strong industrial policy to drive growth, create jobs, and control inflation. With the upcoming budget, they have urged the government to focus on measures that reduce inflation and promote industrial growth. They have also recommended austerity measures and strategic allocation of resources to stimulate economic recovery.
In addition, the decline in sales compared to the last two years, coupled with a 19-month continuous decrease in auto financing, are the consequences of this situation.
Decline in Car Financing
Pakistan’s auto financing sector has seen a significant decline, with a year-on-year drop of 25.82% to Rs. 246.26 billion in January 2024, compared to Rs. 331.98 billion in January 2023.
Furthermore, there was a 1.98% decrease from December 2023. These figures, released by the State Bank of Pakistan (SBP), mark the 19th consecutive monthly decrease in auto financing, totaling a reduction of Rs. 114.29 billion.
Several factors contribute to this decline. Firstly, higher interest rates have made borrowing more expensive, deterring potential buyers from seeking financing. Secondly, the continuous increase in car prices has made vehicles less affordable for the average consumer, further reducing demand for financing.
What are your thoughts on IMC’s recent decision? Share in the comments section.
