Toyota Corolla Cross plans on schedule.

author: FutureCar Staff    

Amid prevailing economic turmoil, Indus Motors Company (IMC) — the maker of Toyota cars in Pakistan — has stated that the automotive industry will face and overcome various challenges. IMC Chief Executive Officer (CEO) Ali Asghar Jamali emphasized the importance of import substitution and increasing exports to tackle the current economic conditions. He assured that IMC is devising plans to survive and will find a way to overcome the obstacles.

According to the CEO, the government has increased the tax burden on cars, resulting in a hike from 42% to 50% of the car price. The company's plans for the Toyota Corolla Cross, Pakistan's first locally manufactured hybrid electric vehicle SUV, are progressing well. However, economic uncertainty and unequal taxation have posed problems for IMC. The plant has been shut down multiple times this year, and the car manufacturing plant often operates on a single shift.

One of the challenges faced by the automobile sector is the import of used cars in Pakistan. Commercial importers import vehicles and sell them to the government without creating any jobs. Jamali highlighted the significant cost difference between importing completely knocked down (CKD) auto parts and importing used cars. Importing CKD auto parts costs around $9,000 per car, while used cars cost around $25,000 to $27,000, which puts a strain on the country's already depleting foreign exchange reserves.

Jamali mentioned that if the government desires, IMC is willing to halt production and solely focus on importing and selling cars. However, the company has taken cost-cutting measures to save one billion, including reducing overheads, operating the plant on a single shift, and optimizing packing material costs. They are also adopting energy conservation steps to reduce expenses. Despite these efforts, auto sales have declined significantly, with a decrease of 16% in July 2023 compared to June 2023 and a plunge of 57% compared to July 2022.

Regarding the localization of auto parts, Jamali explained that they are working on import substitution but face challenges due to local inflation eroding the benefits of localization over time. Pakistan's inflation rate as of August 30, 2023, is 26%, significantly higher than the global inflation rate of 8.27%. The CEO noted that the auto companies did not pay enough attention to localization after Pakistan signed the World Trade Organization (WTO) agreement. This has resulted in Pakistan being at a disadvantage when it comes to accessing other countries' markets.

Furthermore, inflation is impacting both common buyers and the rich class of Pakistan, leading to a decline in vehicle purchases across all segments. Customers are opting for cheaper variants instead of upgrading to more expensive cars. This shift in consumer behavior has affected the sales of all automobile companies in the country.

FutureCar Staff