The auto slump

This refers to the news item ‘Car sales plunge 44 percent in November’ (Dec 11). Apart from the increase in prices post devaluation and higher cost of financing following raise in interest rates by the SBP, another factor contributing to the lower sales is a clampdown on corruption during the last 15 months. Easy availability of dirty money in earlier times was an important driver of demand for new vehicles.

As far as the common man is concerned, s/he remains largely unaffected by the dampened demand for cars, particularly the higher capacity models, while the sales of bikes and rickshaws have been higher. There is little possibility of revival of car sales to the earlier level in the year 2020, other than a modest upturn. Since the auto industry is largely import dependent, the lower demand has a salutary impact on the import bill besides the saving in fuel, which is mostly imported. The auto plants in Pakistan are principally assembling units rather than manufacturing facilities. This is a reason also for higher prices of vehicles as compared with other countries like India. There is no need to bail out the auto industry from the present slump with fiscal incentives and tax concessions except those which convert into full-fledged manufacturing plants to reduce reliance on import and save the forex.

Kulsoom A Majeed

Karachi