Parts shortage portends drop in auto production

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. 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.