AUTO SECTOR IN SORRY STATE OF AFFAIRS.

Byline: SYED FAZL-E-HAIDER

The COVID-19 pandemic has adversely affected growth in key sectors of Pakistan's economy and the auto sector is not an exception. The country's auto sector was already facing a slump before the outbreak of the coronavirus pandemic for many reasons including massive devaluation of rupee, high taxation, skyrocketing inflation and higher interest rate. The auto sales plunged 34% to 175,611 units in the first 11 months of 2019 compared to 235,491 units sold in the same period of the previous year. The irony is that due prevailing dismal situation in the auto industry, some car manufacturers like Indus Motor Company and Honda Atlas Cars Pakistan introduced non-production days last year. Automobile is an export driven-industry providing lucrative investment opportunities for foreign investors.

The country's automobile market is dominated largely by Japanese and Korean manufactures like Suzuki, Honda, Toyota, Hino, Hyundai and Mazda. Many foreign manufacturers including Chinese are reportedly in negotiations with Pakistan to start assembly operations in the country. These manufacturers may be lured to establish the manufacturing and assembling units in the country. Pakistan may seek help from China, its closest friend in order to develop automobile industry in Gwadar. China's vehicle market is the world's third-largest behind the United States and Japan, but the after-market segment is in its relative infancy. In the United States and Europe, after-market sales account for roughly 70 percent of the auto industry.

China's auto market has gone into overdrive in the past ten years as millions of Chinese bought their first cars. Now, the market for replacement parts and service centres is racing to catch up. The government can mobilize the private sector for setting up the manufacturing and assembling units in the new port city of Gwadar. The country has already announced a 15-year tax holiday for the proposed EPZ that has been planned near the Gwadar port for local and foreign investors. Serious efforts on the part of the government can start at least assembly operations in Gwadar. The assembling units in the country are already assembling most of the world leading brands and the government can facilitate the private sector to set up assembling units in Gwadar.

A major reason behind decline in sale of cars was the high interest rate that made car financing tougher and discouraging people from buying cars. In the first five...

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