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Shrinking demand hits car production

September 25, 2012

– File Photo

KARACHI, Sept 24: The continuous slowdown in sale of locally-made cars is hampering production plans of auto makers resultantly a top assembler has decided to increase the non-production days (NPDs) in October.

On the other hand the vending industry is perturbed over the declining orders of parts and accessories from the assemblers since July this year.

Senior General Manager Marketing Indus Motor Company (IMC) Ali Asghar Jamali told Dawn on Monday that the company, after observing seven NPDs this month, intends to extend the NPDs to 10 next month, means curtailing production to 50 per cent.

“There is virtually slackness in demand and production of cars by at least 30-40 per cent,” he said adding that by same percentage the company has reduced the order placement for parts and accessories to its vendors.

“One of the main reasons of falling production is the heavy influx of used cars which is eroding the market share of local assemblers,” he said.

The IMC, he claimed, has 3,000 units of unsold stocks at its dealership network and at Karachi plant. However the company has so far not undertaken any downsizing of employees due to shrinking sales, Jamali added.

He said besides used car impact, recent floods in Punjab and Sindh and law and order situation also impacted car sales. He did not predict any recovery in sales in coming months in view of thriving arrival of used cars while much will also depend on the country’s economic and political situation.

Production of Toyota Corolla vehicles in August plunged to 2,627 units from 2,914 units in July 2012. However, sales in August improved to 2,800 from 2,464 units in July 2012. But Corolla’s production and sales dropped to 5,541 and 5,264 units in July-August 2012 as compared to 7,073 and 7,362 units in the same period of 2011.

A leading auto vendor claimed that vending industry is edging towards closure due to 50-60 per cent slump in demand of components from the assemblers in the last few months.

He said Pak Suzuki, which was producing almost 8,000 to 9,000 units per month few months back, is now rolling out 4,000-5,000 units.

He claimed that Pak Suzuki has given almost nil requirements of Cultus components for October 2012 because of accumulation of unsold stocks. Whereas requirement for Suzuki Mehran, Bolan and Ravi components have also been reduced sharply.

An official of Honda Atlas told Dawn from Lahore that despite launching of new Honda Civic model, which was quite supporting, sales remained depressed by 20 per cent.

He said the company had not reduced the production of Civic and City so far, but decline in buying of new cars would eventually result in drop in production.

On the other hand tractor industry and trucking industry is also facing difficult time because of low demand in the market. A tractor vendor said tractor demand of 50 Horse Power in market is still negligible.

Tractor production in August fell to 3,148 units from 4,566 units in July 2012 because of unsold stocks and sale of subsidised tractors in the market at less prices ranging from Rs.40,000 to 50,000 to original prices of tractors. Demand of tractors in coming months is still uncertain.