LAHORE: The auto industry is facing a severe setback as the investments made are taking a hit due to supply chain disruptions and weak demand.

Despite significant investments in the latest machinery and infrastructure, the underutilisation of resources is becoming a growing concern for the industry.

“Our efficiency got affected due to current economic conditions as vendors’ current capacity utilisation is between 60 to 70pc,” said Haroon Arshad, Chief Executive Officer, Ravi Autos Sundar (Pvt) Ltd while talking to journalists during their visit to vendor manufacturing plants in Lahore.

He added that the current economic situation has impacted the vendor industry at every level due to weak demand, LCs issues, and its effect on current businesses.

Mr Arshad said that total car sales clocked in at 26,988 units for the initial four months of the current fiscal year, down 44pc from 48,573 units in the same period last year.

“This is the trickle-down effect and aftermath of frequent plant shutdowns on numerous issues including the opening of letters of credit (LCs), depressed automobile demand due to the shrinking economy and soaring prices of vehicles, high auto financing due to unbearable interest rate hikes, and rising petroleum prices,” reasoned Mr Arshad.

National Automotive Components (Pvt) Ltd Chief Executive Salman Saleem said that the import of used cars is another big factor playing havoc with vendors’ investments.

He added that over 10,575 used cars were imported in July-October alone, while just 6,050 second-hand cars were imported in the entire FY23.

“Used cars constitute 28pc of the total market in 4MFY24, while for October only, they have claimed 50pc of the total market share,” deplored Mr Saleem.

While showing how localised parts are produced, he said that purchasing of new machinery by vendors in turn supported manufacturing’s efficiency, however, it also brings a huge challenge to retain employees due to low volumes.

Published in Dawn, December 1st, 2023