Local Auto Vendors Hopeful of Sustainable Recovery

Staff Report

Local auto vendors are hopeful that potential growth in the auto industry’s demand will bode well for the vendor industry in the coming months.

“Decline in inflation & interest rates along with a pick-up in economic activity once the new government takes over gives us hope for sustainable recovery,” said Syed Nabeel Hashmi, Chairman, Thermosole Industries (Pvt.) Ltd., while talking to a group of journalists during their visit to local auto vendors.

He added that the local auto industry has started showing slight signs of recovery, after witnessing an average 50% decline for a continuous 18 months, which in turn will prove good to the vendor’s industry.

Mr. Nabeel Hashmi said that the local vendor industry has been subject to continuous turmoil for a long due to overall economic conditions, soaring prices of vehicles, and political uncertainty; which have impacted auto vendors at every level.

“Weak demand, LCs issues coupled with its effects on current businesses, and heavy imports of used cars are the factors contributing to the industry’s plight,” he said.

He mentioned that the supply and demand crisis in the local auto industry resulted in frequent plant shutdowns of OEMs, which hurt vendors.

Mr. Agha Ahmad Raza Khan, Chief Operating Officer at Thermosole Industries said that the imports of used cars are another big factor conducive to the downfall of local auto vendors and continues to play havoc with vendor’s investments.

Vendors shared that they have invested heavily into the upgradation of their manufacturing facilities; including PKR 1 Billion by MECAS Engineering in terms of buying and tooling for IMC projects and PKR 131.3 Million by Thermosole Industries for overall localization improvement, machinery buying, and tooling.

However, Mr. Agha Ahmad opined that those millions of rupees invested in the latest machinery and infrastructure are being underutilized due to low-capacity volumes and weak demand currently and supply chain disruptions previously. Vendor plants’ current capacity utilization is at or less than 60-70%.

Mr. Anas Khan, Operations Manager from MECAS Engineering (Pvt.) Ltd., another vendor, stated that from July to January in the current FY2023-24, more than 21,874 used cars were imported; while in the same time last year FY22-23, a total of 2,990 used cars were imported. This outnumbers the local car production of some OEMs.

“Used cars have claimed 30.68% of the total market share in current financial year 23-24 so far,” he said, adding that this is posing a huge challenge to employee retention for local vendors.IMC Launches First Locally Manufactured Hybrid Corolla Cross

Indus Motor Company has recently announced their plans through PSX to invest around Rs. 3 Billion; towards plant, machinery, molds, dies and equipment for additional localization of parts and components to be manufactured for various existing vehicles.

This will allow the company to reduce the outflow of foreign exchange for the country and continue promoting the local industry.