The auto sector is big, with its manufacturers providing a large number of jobs, and the import of parts for manufacture providing big business in itself. It is a separate issue that Pakistani manufacturers are actually merely assemblers, with auto-part manufacture still at a relatively primitive stage. There are a number of reasons why the deletion programme has not gone well, but the sector is considered a driver of the economy, therefore the decline of eight percent in car sales in February compared to January was not good news, and the fact that sales had actually gone up 57 percent year-on-year merely reflects the abysmal performance of the industry last year. Auto sales are actually a fairly reliable indicator of how well the economy is doing. With a deluge of anecdotal evidence about how hard times are, it would be a wonder if car sales did not continue to fall.
As a consumer durable, a car would only be bought when there is some disposable income, when consumers feel not just that they are earning for immediate needs, but are putting away enough for a rainy day. That kind of recovery is not visible. Sales have taken a hammering because of skyrocketing prices, which have been caused by the decline in the rupee. Last year’s recovery in the rupee was too anaemic to make a difference, with one result being that sales have still to recover. A factor likely to depress sales in coming months is the recent increase in the sales tax on cars; these latest figures did not reflect the effects of the tax hike.
Individual manufacturers show variation, with Indus Motors declining, its Fortuner and Revo posting poor figures, while its Toyota series was affected by the launch of the Cross last month. Suzuki and Honda both increased sales, though Honda posted a year-on-year decline.
While Millat and Ghazi fought each other for market share in the tractor segment, the decline in that segment was perhaps the most worrisome, because tractors are not consumption items but productive tools. Pakistan is an agricultural country, and the mechanization of agriculture is by no means complete. Car companies have been at the head of the rally after the elections, but whereas a controlling of inflation, and a cut in the interest rate, would help them, a return to the industry’s profitable heyday depends on the revival of real growth.
