Karachi, October 31, 2023 – The Pakistan automotive industry is encountering significant challenges as the government provides incentives for car imports, impacting local manufacturers and the economy.
Indus Motor Company, one of Pakistan’s leading auto manufacturers, issued a report highlighting the hurdles faced by the domestic auto sector. Despite recent positive economic indicators such as a reduced currency deficit and increased forex reserves, the sector anticipates difficulties in the upcoming quarter. The rising trend of importing used cars may have profound implications for local Completely Knocked Down (CKD) base manufacturing operations.
The financial year 2023-24 is poised to play a pivotal role in shaping Pakistan’s political and economic future. The policy decisions made in the second quarter of the fiscal year will significantly influence the nation’s economic recovery and political direction. Effective management during this critical period is crucial to steer Pakistan toward stability and growth.
The industry is calling for a level playing field due to reduced taxes on used cars, emphasizing the need for fair competition. Pakistan’s existing taxation system, which is based on engine cubic capacity (CC) for Withholding Tax (WHT), Sales Tax (ST), and Federal Excise Duty (FED), has raised concerns about discrimination among vehicles with similar Retail Selling Prices (RSP). Addressing these industry concerns and implementing equitable taxation policies is essential for fostering a fair and sustainable tax system that supports volume growth and promotes the localization of parts in Pakistan.
While some economic indicators have improved, the overall economy is still experiencing a slowdown similar to the past fiscal year. Inflation remains high, and due to the economic slowdown, higher duties and taxes, and reduced consumer purchasing power, the demand for vehicles has remained subdued in the first quarter. Additionally, supply chain challenges have continued to adversely affect the auto sector. Consequently, the auto sector has operated at below 40% production capacity, leading to frequent plant shutdowns observed during the three-month period ending on September 30, 2023.
During this period, the total sales of Pakistan Automotive Manufacturers Association (PAMA) members for locally manufactured Passenger Cars (PC) and Light Commercial Vehicles (LCV) decreased by 40% to 20,983 units, as compared to 35,002 units sold in the corresponding quarter last year. PAMA members’ total production of locally manufactured PCs and LCVs for the three months of the fiscal year also decreased by 46% to 21,820 units, compared to 40,494 units produced in the same period last year.
The combined sales of Completely Knocked Down (CKD) and Completely Built-up Units (CBU) vehicles of Indus Motor Company for the three-month period ending on September 30, 2023, decreased by 49% to 4,583 units, in contrast to 8,994 units sold in the corresponding period last year. The market share of the company in the overall market stood at approximately 22% concerning PAMA players for the first three months ending on September 30, 2023. The company produced 4,614 vehicles during the same three months of the fiscal year, registering a 50% decrease compared to the 9,218 units produced in the same period last year. The company attributed this decline in production to low demand and supply chain challenges.
Despite the challenges of rising costs, the company managed to achieve positive results through cost reduction efforts and kaizen initiatives. The Company’s net sales turnover for the quarter ending on September 30, 2023, decreased to Rs. 32.671 billion, compared to Rs. 37.249 billion in the same period last year. However, the profit after tax increased to Rs. 3.216 billion, as against Rs. 1.297 billion achieved in the same period last year.
During the quarter ending on September 30, 2023, the Company received various accolades, including the “Development Leadership Award” by the Ministry of Planning Development and Special Initiatives, the “Annual Environment Excellence Award 2023” by the National Forum for Environment & Health (NFEH), and three awards in the categories of “Best Environmental Practices,” “Solid Waste Treatment and Disposal,” and “Water Treatment” under the banner of Environment, Health & Safety Awards 2023 by The Professionals Network (TPN).
The Earnings Per Share (EPS) of the company for the quarter ending on September 30, 2023, is Rs. 40.91, compared to Rs. 16.50 reported in the same period last year. The Board of Directors has declared the first interim cash dividend of Rs. 24.5 per share for the quarter, as compared to Rs. 8.20 per share for the same period last year. Transactions with related parties, as disclosed in the financial statements, were carried out in the ordinary course of business during this period.The Pakistan automotive industry is encountering significant challenges as the government provides incentives for car imports, impacting local manufacturers and the economy. Indus Motor Company, one of Pakistan’s leading auto manufacturers, issued a report highlighting the hurdles faced by the domestic auto sector. Despite recent positive economic indicators such as a reduced currency deficit and increased forex reserves, the sector anticipates difficulties in the upcoming quarter. The rising trend of importing used cars may have profound implications for local Completely Knocked Down (CKD) base manufacturing operations.
The financial year 2023-24 is poised to play a pivotal role in shaping Pakistan’s political and economic future. The policy decisions made in the second quarter of the fiscal year will significantly influence the nation’s economic recovery and political direction. Effective management during this critical period is crucial to steer Pakistan toward stability and growth.
The industry is calling for a level playing field due to reduced taxes on used cars, emphasizing the need for fair competition. Pakistan’s existing taxation system, which is based on engine cubic capacity (CC) for Withholding Tax (WHT), Sales Tax (ST), and Federal Excise Duty (FED), has raised concerns about discrimination among vehicles with similar Retail Selling Prices (RSP). Addressing these industry concerns and implementing equitable taxation policies is essential for fostering a fair and sustainable tax system that supports volume growth and promotes the localization of parts in Pakistan.
While some economic indicators have improved, the overall economy is still experiencing a slowdown similar to the past fiscal year. Inflation remains high, and due to the economic slowdown, higher duties and taxes, and reduced consumer purchasing power, the demand for vehicles has remained subdued in the first quarter. Additionally, supply chain challenges have continued to adversely affect the auto sector. Consequently, the auto sector has operated at below 40% production capacity, leading to frequent plant shutdowns observed during the three-month period ending on September 30, 2023.
During this period, the total sales of Pakistan Automotive Manufacturers Association (PAMA) members for locally manufactured Passenger Cars (PC) and Light Commercial Vehicles (LCV) decreased by 40% to 20,983 units, as compared to 35,002 units sold in the corresponding quarter last year. PAMA members’ total production of locally manufactured PCs and LCVs for the three months of the fiscal year also decreased by 46% to 21,820 units, compared to 40,494 units produced in the same period last year.
The combined sales of Completely Knocked Down (CKD) and Completely Built-up Units (CBU) vehicles of Indus Motor Company for the three-month period ending on September 30, 2023, decreased by 49% to 4,583 units, in contrast to 8,994 units sold in the corresponding period last year. The market share of the company in the overall market stood at approximately 22% concerning PAMA players for the first three months ending on September 30, 2023. The company produced 4,614 vehicles during the same three months of the fiscal year, registering a 50% decrease compared to the 9,218 units produced in the same period last year. The company attributed this decline in production to low demand and supply chain challenges.
Despite the challenges of rising costs, the company managed to achieve positive results through cost reduction efforts and kaizen initiatives. The Company’s net sales turnover for the quarter ending on September 30, 2023, decreased to Rs. 32.671 billion, compared to Rs. 37.249 billion in the same period last year. However, the profit after tax increased to Rs. 3.216 billion, as against Rs. 1.297 billion achieved in the same period last year.
During the quarter ending on September 30, 2023, the Company received various accolades, including the “Development Leadership Award” by the Ministry of Planning Development and Special Initiatives, the “Annual Environment Excellence Award 2023” by the National Forum for Environment & Health (NFEH), and three awards in the categories of “Best Environmental Practices,” “Solid Waste Treatment and Disposal,” and “Water Treatment” under the banner of Environment, Health & Safety Awards 2023 by The Professionals Network (TPN).
The Earnings Per Share (EPS) of the company for the quarter ending on September 30, 2023, is Rs. 40.91, compared to Rs. 16.50 reported in the same period last year. The Board of Directors has declared the first interim cash dividend of Rs. 24.5 per share for the quarter, as compared to Rs. 8.20 per share for the same period last year. Transactions with related parties, as disclosed in the financial statements, were carried out in the ordinary course of business during this period.