Some car assemblers, manufacturers may exit Pakistan

Some car assemblers, manufacturers may exit Pakistan

KARACHI: Some car assemblers/manufacturers may exit Pakistan market because the automotive industry is facing immense difficulties.

Indus Motors in a management briefing informed that automobile sector faces unforeseen external challenges due to unprecedented rupee devaluation and import restrictions by SBP. “That said, some players may exit from the market,” according to Topline Securities quoted as saying.

READ MORE: Pakistan car sales plunge 50% in 1QFY23

Indus Motors (INDU) conducted its Corporate Briefing Session (CBS) today to discuss the first quarter of the current fiscal year financial results and company outlook.

INDU is currently running at production capacity of 40-50 per cent due to SBP restrictions and management don’t see restriction to ease soon.

At current production level, INDU’s order book is filled for next 3 months. The orders can be delivered in 4-5 weeks if restriction eases.

READ MORE: Pakistan car sales plummet by 50% on import restriction

Furthermore, floods wreaking havoc along with higher inflation and low purchasing power of consumers will have a negative impact on demand of the entire auto sector in upcoming periods.

The auto financing is down from 35 per cent to just 10 per cent due to higher interest rates and reduction in financing tenure.

Management informed that localization rate in value terms for Yaris and Corolla is 65 per cent after deduction of 39 per cent taxes and duties.

READ MORE: Pakistan car sales drop 59% in July 2022

With regards to recently announced refund policy, management informed that around 400-500 clients cancelled their booking and got their cash back along with interest amount.

Investment plan of US$100mn for local production of HEV vehicles is on track; where company is expected to launch its variant by end of next year in 2023.

Pakistan car sales down 51 per cent YoY to 47,178 units in 1QFY23 out of which INDU car sales clocked in at 8,994 units, down 52 per cent YoY. Used car imports clocked in at 1,039 units in 1QFY23.

READ MORE: Pakistan car sales surge 54 per cent in FY22

Net sales in 1QFY23 down 43 per cent to Rs37bn from Rs66bn in 1QFY22 due to lower production on account of limited imports allowed by SBP thereby forcing the company to observe regular shutdowns during the quarter. Similarly profit after tax also down by 76 per cent YoY to Rs1.3bn from Rs5.4bn primarily due to gross loss.

INDU recorded gross loss of 6 per cent in 1QFY23 compared to gross profit of 11 per cent in 1QFY22 due to rupee devaluation against US dollar, increased freight charges and higher commodity prices. The management indicated the there would also be loss in 2QFY23 however the quantum would be lower compared to 1QFY23.

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