In the bustling automotive sector of Karachi, local automakers are facing an uphill battle to entice buyers, resorting to price cuts, registration discounts, and enticing auto financing deals. Despite their efforts, the spotlight is increasingly shifting towards the imported used car market, which is demonstrating robust growth.
H.M. Shahzad, Chairman of the All Pakistan Motor Dealers Association (APMDA), revealed staggering figures indicating a surge in used car imports. During the July-May period of FY24, a staggering 28,000 used cars were imported, a significant leap from the 14,000-15,000 units recorded throughout FY23. Shahzad forecasts that by the fiscal year’s end, total imports could reach 35,000 units, potentially funneling around $400 million into the government’s coffers through customs duties and taxes.
The spike in imports, particularly in the 660-1,000cc segment, is attributed to the newfound stability in political and economic spheres, contrasting starkly with the uncertainties of the preceding year. Data from the Pakistan Bureau of Statistics underscores this trend, with completely built-up (CBU) units witnessing a remarkable 256% surge in imports, totaling $207 million in July-April FY24.
Shahzad advocates for policy adjustments to further facilitate used car imports, proposing an extension of the allowable vehicle age from three to seven years for cars, including hybrids and electrics, and from five to seven years for SUVs and LCVs. Such measures, he contends, would not only alleviate the burden of expensive imported petrol but also inject healthy competition into the market, compelling local assemblers to recalibrate pricing strategies and curb black marketing practices.
The local automotive landscape paints a contrasting picture, with sales of locally assembled cars plummeting by 29% during the 10 months of FY24, amidst a backdrop of persistently contracting auto financing. The latter has dwindled for the 22nd consecutive month, dwindling to Rs236 billion in April from Rs239.4 billion in March, and marking a substantial Rs132 billion decline since June 2022, according to the State Bank of Pakistan.
In this climate of economic prudence and evolving consumer preferences, the allure of financing for used cars remains strong, outstripping demand for locally assembled new vehicles, particularly against the backdrop of a daunting 22% interest rate.
As the automotive industry grapples with these dynamics, the tide seems to favor imported used cars, posing both challenges and opportunities for local manufacturers amidst shifting consumer behavior and regulatory landscapes.
