Automakers expect a bumpy ride ahead.

Byline: Aamir Shafaat Khan

Following a drop of up to 72 per cent in automobile sales in the first half of 2019-20, stakeholders in the auto sector say dark clouds will likely continue hovering over the sector in January-June.

Issues like high prices on account of the federal excise duty ranging from 2.5pc to 7.5pc on engines of different horsepower, additional customs duty on raw material imports, record high interest rates and strict vigilance by the Federal Board of Revenue (FBR) still persist.

However, January and February are considered better months for sales. People resume buying after suspending their purchases in November and December in anticipation of a change in model.

The first half of 2019-20 also saw non-production days (NPDs) at many assembling units followed by plant shutdowns for longer durations, especially in tractor units. Unsold inventories piled up at plants and dealerships, forcing a large number of workers in the auto-part industry to stay out of work.

The government did not play any role in checking multiple price increases by car and bike assemblers. The frequent price hikes were justified on account of the dropping value of the rupee against the dollar, which nullifies the assemblers' claim about higher localisation. Although the exchange rate finally reverted to Rs155 after swelling to Rs164 in June 2019, car and bike prices continued to rise.

'Nobody wants to go for expansion because of poor economic and political conditions'

Greenfield and brownfield investors who put in over $1 billion under the Auto Development Policy 2016-21 are also operating in an unfriendly business environment amid depressed demand.

Under Category A, 18 investors have been granted the greenfield status since 2016. Two closed-down units have also been revived under the brownfield status. Regal Automobiles, United Motors, Master Motors, JW Foreland, Kia Lucky Motors and Hyundai Nishat Motors have already started car and SUV production.

However, the fate of two entrants - Al-Futtaim Renault and Ghandhara Nissan Datsun - hangs in the balance with the possibility of them pulling out of Pakistan.

Assemblers are cautiously optimistic about their sales outlook in the second half of 2019-20. Hinopak Motors Vice President for Production and Business Operations Naushad Riaz said, 'I don't see any chance of growth in the next six months. We are praying for stability at least for the next few months to avoid any further losses.'

The situation is...