Plans for Toyota Corolla Cross on track, says Indus Motors CEO

Auto sector to deal with crisis through import substitution, exports, vows Asghar Jamali

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A representational image of a car manufacturing plant. — AFP/File
A representational image of a car manufacturing plant. — AFP/File

  • IMC CEO says automobile sector facing several challenges
  • Laments import of used cars in Pakistan
  • We are devising plans to survive, says Asghar Jamali

KARACHI: Amid prevailing economic turmoil, Indus Motors Company (IMC) — the maker of Toyota cars in Pakistan — has said that the automotive industry will navigate through the challenges, while highlighting the importance of import substitution.

“We are working on import substitution as well as looking for ways to increase exports to tackle the current economic condition, said IMC Chief Executive Officer (CEO) Ali Asghar Jamali while speaking to a group of journalists on Wednesday.

“We are devising plans to survive and we will survive somehow,” the IMC CEO vowed.

The CEO said the government increased the tax burden that hiked from 42% to 50% of a car price in the name of GST, CVT, WTH etc.

While the company’s plans for the Toyota Corolla Cross — Pakistan's first locally manufactured hybrid electric vehicle SUV — are well on track, it is facing problems due to economic uncertainty and unequal taxation, he added.

It shut down the plant multiple times this year and it runs the car manufacturing plant on a single shift often.

The commercial importers just import vehicles and sell them to the government without creating any jobs.

“On average when we import completely knocked down (CKD) auto parts of a vehicle, it costs around $9,000 per car. A used car costs around $25,000 to $27,000, a huge dent to the already depleting for exchange reserve.”

The total liquid foreign reserves held by Pakistan stood at $13.248 billion as of August 18, 2023. Foreign reserves held by the State Bank of Pakistan (SBP) were $7.930 billion while net foreign reserves held by commercial banks were US$ 5.317 billion.

If the government wants “we will leave all the hassle production aside and simply commence importing cars and selling them,” said Jamali.

“We have recently saved one billion by cost-cutting from overheads, running plant in a single shift, reducing transport, canteen and entertainment expenditures. We are also trying to optimise packing material costs while adopting energy conservation steps.

Auto sales — cars, light commercial vehicles (LCVs) vans, and Jeeps— decreased by 16% to 5100 units during July 2023 compared to June 2023 while they plunged by 57% when compared to July 2022, according to AHL Research. During seven months of calendar year 2023, auto sales clocked in at 48,000 units down by 69% year on year.

The auto number has declined across the board by around one-third. Every company has made one-third sale of what they did three years ago.

Inflation erodes localisation benefits

While answering a question about localisation of auto parts, he said they are working on import substitution but local inflation erodes their benefit of localisation after some time. 

As of August 30, 2023, the inflation rate in Pakistan is 26%. This means that the prices of goods and services in Pakistan have increased by 26% in the past year while global inflation rate is 8.27%.

Experts, however, say that the auto companies did not pay any attention to localisation after Pakistan signed the World Trade Organization (WTO) on 1 January 1995. Under the agreement, a WTO signatory country cannot stop the import of any product that definitely helps a country to get access to other countries’ markets but Pakistan has been a loser in this case.

Against normal phenomena, this time inflation is impacting common buyers of a car and the rich alike, said the CEO. This time rich class of Pakistan has also stopped purchasing vehicles.

Customers are moving downwards while choosing their new car instead of upgrading themselves. They are going for the cheaper variant instead of moving upward and buying an expensive car, he said.