KARACHI: Imports of completely knockdown kits (CKD) by the local car assemblers plunged 58 per cent to $23 million in October from $54m in September.

This is the lowest monthly CKD imports recorded by the country and is also lower than the average seen during Covid times. Car production may further reduce during the next couple of months, Muhammad Tahir of Sherman Securities claimed.

Interestingly, average monthly CKD imports during FY22 stood at the highest around $142m.

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CKD imports shrank 41pc to $208m in 4MFY24 from $355m a year-ago period.

The huge decline in auto parts import is the result of the government’s policy to control current account deficit (CAD), leasing curbs by the State Bank of Pakistan amid unprecedented interest rates that discouraged auto financing, showing consistent decline over the last 16 months while high car prices and inflation erodes purchasing power, he said.

If this trend in CKD imports continues, car sales may dip further in November and December. Auto sales during October fell to a three-month low level of 6,000 units, he said.

The auto sector has been in the limelight at Pakistan Stock Exchange (PSX) outperforming the KSE 100 index by 12pc ever since Pak Suzuki Motor Company Ltd (PSMCL) announced voluntary delisting on Oct 12, thus creating excitement amongst investors.

This delisting would unlock fair valuation for all other companies in the auto sector which are trading below historical book values due to economic slowdown, peak interest rates and import curbs, he said.

He said the import of bus and truck CKDs recorded a steep decline of 92pc to $1.5m in October from $18m in September. A 57pc drop was registered in the arrival of heavy vehicles’ kits to $56m during 4MFY24 from $131m in the same period last year.

Mr Tahir said additional demand for trucks may come following the government’s strict implementation of the axle load regime. Transporters will now be following the government’s prescribed load limit according to the axles of the vehicle. For example, three axles can load 27.5 tonnes. Currently, transporters load twice the prescribed limit.

Acting CEO Baluchistan Wheels Ltd (BWL) Mohammad Irfan Ghani said the automobile manufacturers are facing production issues due to shortages of parts that are imported as CKD.

“The survival of automobile assemblers in Pakistan hinges on localisation. Failing to pursue this path exposes the industry to high risks,” he said, adding that localisation of parts offers several advantages, including cost-effective production, job creation, healthy competition, enhanced quality and preservation of valuable foreign exchange.

He said assemblers must earnestly consider reducing imports of CKD parts that are readily available from local vendors and can be manufactured using domestic resources. Encouraging local production not only strengthens the domestic industry but also eases the challenges faced by the auto vending sector, which is currently under significant strain, Mr Ghani added.

Published in Dawn, November 23rd, 2023