There is no stopping cars demand in Pakistan, be it imported or locally manufactured. The sale of locally manufactured cars has gone up by 22 percent in the five-month period of CY18. That of imported cars has almost doubled in the same period. The imports of Completely Built Unit (CBU) have gone up from $134 million in 5MFY17 to $254 million in 5MFY18, and growing.

The combined CBU and CKD imports in motor car category have crossed $1 billion on calendar year basis in the eleven months of CY17. Talk about having one of the highest import tariffs on vehicle imports in the region. The automobile demand appears to be on strong footings and organic, and the motive of protecting the local industry is still paying dividends, even with mushrooming growth of imported cars.

November 2017 saw highest ever CBU imports in Pakistan at $63 million, up from a monthly average of $28 million in CY16. The gap between CBU and CKD imports is fast closing down. The CBU/CKD ratio has now gone up from 0.49 in CY13 to 0.71 in the year to date. It is staggering to see how the demand for locally manufactured cars has not been impacted even the slightest bit, which goes on to show there is much more room for new players to enter and capture a growing market. Although it also shows, the preference of older imported cars also reveals local manufacturers will have to up their game in terms of quality, or else they risk sitting on idle capacity down the road.

By rough estimates, 6000-7000 imported cars are being added to the roads of late, in addition to 18000 of the locally manufactured ones. Once newer players enter, it will be intriguing to see if the market size of the imported segment comes down, or the brunt is born by the locals.

From what it appears, localization does not seem have gone up the roof, as the imported component per vehicle averages $3600 in 5MFY18, as against $3500 in 5MFY17.

There are lessons to be learnt from the auto story, of local and imported demand. There are talks of further increasing tariffs on imported cars, which could be counterproductive and serve as an invitation for more complacency to the local manufactures. Ideally, the up tick in demand and entry of newer players should result in lesser imports, but it would only be possible if the reason why customers prefer imported cars over local ones gets looked into. The coming period will make for a good SWOT analysis of the auto industry.