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As Pak Suzuki plans to delist, a glance at Pakistan's automobile industry

Auto sector in Pakistan has registered a huge decline in sales volumes from the latter half of 2022, thanks to the import restrictions imposed by SBP on the import of CKD kits of vehicles

The logo of Suzuki Motors is displayed at the 44th Tokyo Motor Show in Tokyo. Photo: Reuters

The logo of Suzuki Motors is displayed at the 44th Tokyo Motor Show in Tokyo. Photo: Reuters

BS Web Team New Delhi

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Suzuki Motor Corp is planning to take full control of its Pakistan business and delist the share of Pak Suzuki Motor Company from the Pakistan Stock Exchange, a report in HTAuto said. This comes at a time when the Pakistani economy is going through a difficult external environment and large fiscal and external deficits.

Pak Suzuki assembles Suzuki vehicles and motorcycles in Pakistan and has registered losses in 2019, 2020, and 2022. The company cited the financial losses as one of the primary reasons for delisting. Elaborating on the situation in Pakistan, the Pak Suzuki Director's statement read, "Difficult external environment, devastating floods and policy missteps had led to large fiscal and external deficits, rising inflation and eroded reserve buffers in the Financial Year 2022-23."

What's hurting the Pakistan auto industry?

Put simply, almost everything. As the country struggles through one of the most challenging economic times it has witnessed in its history, the Pakistani automobile sector is far from being immune to this turmoil. The half-yearly report of Pak Suzuki for 2023 sheds some light on the state of affairs in the Pak auto industry. 

Released in June, the report said that the unprecedented depreciation of the Pak Rupee, hike in interest rate, political instability, rise in inflation, and government's actions to control imports had adversely impacted the Pakistani economy. The report said that the Large Scale Manufacturing (LSM) sector witnessed a 10.26 per cent drop during the financial year July 2022 - June 2023 (FY23). The financial year in Pakistan is from July 1 to June 30.

During this time, the share of the automobile sector dropped 2.21 per cent of LSM during FY23. Exports for the auto industry also took a hit as they went down from $32.5 billion in FY22 to $ 27.9 billion in FY23. In FY23, remittances also dropped to $27.9 billion against $31.3 billion in FY22.

Similarly, the imports for Pakistan also declined to reach $ 52 billion, thanks to the strict import restrictions imposed by the State Bank of Pakistan (SBP). This has brought Pakistan's current account deficit (CAD) down to $2.6 billion in FY23 from $17.5 billion during the last financial year.

Pakistan auto industry

The auto sector in Pakistan has registered a huge decline in sales volumes from the latter half of 2022, thanks to the import restrictions imposed by SBP on importing completely knocked down (CKD) kits of vehicles. Import restrictions have prevented manufacturers from production in the year 2023. OEMs were forced to opt for "Non-Production Days (NPDs)."

Import restrictions have been eased in June 2023, and this is likely to resolve the supply constraints, which can help improve manufacturing.

Popular cars in Pakistan

Popular cars in the Pakistan auto industry include familiar names like Honda's City and Civic, Suzuki's Alto, Wagon R Swift, Cultus (Celerio), and Toyota's Corolla, and Yaris. While these names and the cars themselves are very much what these companies sell in the Indian market, their prices are much higher in Pakistan

For example, the Maruti Suzuki Swift starts at Rs 6 lakh (ex-showroom) in India. In Pakistan, the same product starts at a price of 42.6 lakh Pakistani rupees, according to prices listed on pakwheels.com. At current conversion rates, on October 23, 2023, 1 INR equals 3.31 PKR.

So, even after adjusting for the currency, the Swift in Pakistan costs more than Rs 12.5 lakh in Indian rupees. The story is the same for other cars. For example, the Suzuki Alto starts at PKR 22.5 lakh ex-showroom. The Suzuki Jimny costs a whopping PKR 60.49 lakh.
 

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First Published: Oct 23 2023 | 5:57 PM IST

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