KARACHI: The axle load regime (ALR), implemented from Nov 15, 2023, is expected to revive the ailing sales of truck assemblers following the takeover by the new government next year.
ALR will certainly result in a better perspective, but in phases, of course. In the first phase, a large number of idle vehicles will be on the road, providing great relief to the operators, and its operation will generate revenue to pay off banks.
At the moment, heavy overloading is still being carried out, and the implementation of ALR will target more vehicles. However, the real effect will take some time.
Muhammad Tahir Jawed, Director of Sales and Marketing at Afzal Motors and Daewoo Pak Motors Limited, told Dawn on Saturday that, in view of the overall economic situation, especially in the next few months leading up to the general election in Feb 2024, followed by the formation of a new government, only a conservative estimate could predict positive results of ALR in the later part of the year 2024.
Manufacturers urged to prioritise lighter, fuel-efficient designs
It will be necessary for vehicle manufacturers to rethink the specifications of locally assembled trucks and buses as well. Lighter chassis weight, low-weight trailers, high speed, and, more importantly, fuel efficiency will be key to cater for the requirements of fleet operators, he said.
On the import of used trucks, he stated that this has been the biggest hurdle to the development of the local industry in the past. The heavy commercial vehicles (HCVs) plants are operating at merely 30pc capacities and are fully capable of catering to the demand of the transportation sector after ALR implementation. However, there is a need to customise the products, he said.
The HCV sector immediately feels the negative impact of any policy, such as restrictions on opening letters of credit (LCs) due to their low volumes. Besides LCs, the policy of exporting a certain number of commercial vehicles has kept almost all manufacturers in chaos. On one hand, the demand is at the lowest, and on the other hand, hurdles on the import and customs clearance of parts due to the export policy are adding salt to the wounds of heavy vehicle assemblers, he said.
The logistics industry is gradually transforming into a corporate model, with large groups taking a major share of goods movement and adjusting for ALR by acquiring lightweight trucks and lighter trailers, immediately benefiting. Conversely, it is expected that many individually-based truckers will be phased out gradually, said Tahir.
“I believe that ALR and a high interest rate of 24pc KIBOR plus will restructure the transportation sector in the long term, and only skilled, educated, dynamic, organised, and financially strong fleet operators will grow,” he said, adding that similar changes are anticipated for vehicle manufacturers in Pakistan by the end of 2030.
The commercial vehicle industry has faced challenges in the last three to four years, experiencing a 30pc drop in overall demand due to the rising cost of commercial vehicles caused by rupee devaluation, steep increases in raw material prices and high mark-up rates.
Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMYES) offered low-interest rate financing under the PTI government. A large number of youths purchased commercial vehicles through this scheme. However, PMYES was terminated by the PMLN-led coalition government, leading to a sharp decline in commercial vehicle sales.
Tahir noted that the adverse effects of the change of government are more visible in the Pakistani automobile sector. The supply chain has not normalised to date due to the unprecedented slowdown in production, shortages of raw materials, non-availability of CKD due to LC restrictions, the rupee depreciation leading to cost escalation, and major shutdowns in the auto industry.
“No new projects for commercial vehicle assembly were announced during the last three years, and even a few are on the verge of closure, while some commercial vehicle projects aiming to invest have halted their investments due to stagnant demand,” Tahir claimed. Almost all the Chinese representatives in the automobile industry have gone back due to negligible sales of commercial vehicles.
The Pakistan Automotive Manufacturers Association (PAMA) data showed that truck sales shrank by 45pc during 4MFY24 to 608 units from 1,109 units in the same period last year. During FY23, sales plunged 45pc to 3,182 units from 5,802 in FY22.
Published in Dawn, December 10th, 2023