Pakistan’s auto sales have slammed on the brakes, veering sharply off its prebudget high. Passenger car sales nosedived nearly 49 percent in July compared to June’s buying spree. It came as a result of the aftershocks of fresh fiscal measures shook both consumers and automakers.
Auto Sales: What Enfold?
Data from the Pakistan Automotive Manufacturers Association (PAMA) shows only 7,135 units were sold in July, a stunning 60 percent plunge from the previous month’s rush, yet still 22 percent higher than last year. The pattern is clear: buyers stormed showrooms in June, racing against the clock to dodge looming tax hikes, only for the market to hit a pothole the moment the new fiscal year rolled in.
Much of this sudden slowdown comes down to the anticipated jump in General Sales Tax on compact vehicles, from 12.5 to 18 percent, along with whispers of higher withholding taxes on midrange and luxury models. The result? A June buying blitz followed by a July drought as showroom floors went from bustling to bare in a matter of weeks.
Industry voices are growing louder: Experts are warning that without consistent, predictable tax policies, the sector risks lurching from one boom and bust cycle to the next.
The International Monetary Fund (IMF) has been urging Pakistan to overhaul its auto tariff regime, calling for a cut in protectionist duties that currently top 40 percent, costs that trickle down to the consumer. Advocates argue that opening the gates for used and electric vehicles, while trimming tariffs, could inject stability into the market.
Passenger vehicles are the heartbeat of several industries, from auto parts suppliers and finance companies to dealerships and service networks. A prolonged slowdown could send shockwaves through all of them, tightening credit, slowing production, and threatening jobs.
Way Ahead
For now, experts say the government must tread carefully. There needs to be targeted incentives, easing financing costs, and slight nudging towards efficient vehicles. But unless policy finds the right gear, the auto sector may find itself stuck in neutral. The automobile industry in the country cannot stand tall on the momentum of June sales alone; there needs to be some remedial actions.