KARACHI: The import bill of completely and semi-knocked down (CKD/SKD) kits of locally assembled cars hit an all-time high of $1.7 billion in FY22 compared to $1.11bn in the preceding year, a jump of 52 per cent owing to escalating demand for vehicles and low localisation.
Impressive CKD/SKD import figures also justify 55pc in car sales in FY22 to 234,180 units as consumers did not show any resilience towards vehicle buying despite high interest rates coupled with rising prices and bar on auto financing by the State Bank.
The intensity of thriving demand for locally made cars was so high that the import bill of CKD/SKD reached $1bn in just eight months (July to February) of FY22 compared to $1.11bn during the entire FY21.
The auto sector believes that the Auto Policy 2016-2021 had definitely changed the landscape of the country’s auto sector but the policy incentives of allowing local assembly by new entrants at a mere 5pc localisation had caused a big hit to the national kitty due to a whopping import bill of both kinds of kits.
Large chunk of foreign investment in auto sector coming from China, Korea
The rest of the damage was done by the existing assemblers who had been introducing new models with fewer locally made parts.
In May 2022, Pak Suzuki Motor Company Ltd (PSMCL) informed the market that the localisation in Swift was 35pc followed by 51pc in Cultus, 60pc in WagonR, 62pc in Alto 660cc, 72pc in Bolan and 68pc in Ravi. The usage of locally made parts in Toyota Corolla and Yaris is above 65pc.
There are no apparent signs that the import bill of CKD/SKD would come down as the new entrants, whose projects were approved under the Auto Policy 2016-2021, would keep assembling the vehicles at a very low volume of locally made parts.
However, new models being introduced by the existing Japanese assemblers would also need some time to utilise locally made parts.
A vendor said the five-decades-old auto sector has not made any serious efforts to improve the presence of locally made parts in the local assembly of vehicles. New entrants also focused more on rolling out SUVs rather than introducing small cars thus resulting in a higher value of CKD/SKD imports.
Mehran Commercial Enterprise Director Mashood Ali Khan said negligible localisation in new entrants’ vehicles, as well as existing assemblers’ new models, was because of incentives given under the auto policy. On the positive side, the country witnessed huge foreign investment in the auto sector from China and South Korea but its negative side was very less utilisation of locally made parts in the vehicles.
He said assemblers in the last few months had planned to improve imports of CKD/SKD kits despite the huge increase in freight rates to ensure better availability of vehicles, especially in June, to offset any negative impact of any budgetary measures on the consumers.
Mr Mashood recalled that auto sales had dipped at least four times since the 1990s to date after recording fabulous growth in sales.
He feared that this trend would likely revive in the current fiscal year due to high vehicle prices, interest rates and restrictions put in place by the State Bank on auto financing.
Published in Dawn, July 24th, 2022