Pakistan

If numbers could talk…

If numbers could talk…

… they would be weeping. Austerity is not good for anyone, least of all manufacturing businesses as consumption declines and therein, demand explores new bottoms. The manufacturing sector registered FY19 as the worst performing year in a decade (read: “Manufacturing recession”, Aug 22, 2019). Automobiles is not far behind. The start of the fiscal FY20 is a somber one with passenger car sales almost slashed down by half, while sales for heavy commercial vehicles declined by 30 percent and by 32 percent for light commercial vehicles. Overall, sales came down by 24 percent in Jul-19 year on year shrinking the overall pie.

Though trade data for July has not been published yet, if June-19 is any indicator, imports of full built commercial vehicles came down by a steep 43 percent and unassembled kits fell by 34 percent. The latter has translated to lower assembling. Both assemblers and traders are witnessing a reduction in demand while government policies to curb imports through regulatory measures may also be yielding results.

Overall trade activity in the economy is also indicative of commercial vehicle sales. Imports fell by 9.8 percent while exports fell by 1 percent in FY19. Large scale manufacturing has shrunk by 4 percent during the year. It is also clear that the CPEC-demand that was expected to bring up the demand for truck usage up to 20,000-60,000 by FY20 is not going to be achieved anytime soon. Evidently, consumption has come down, and new demand either private sector or public sector-led is not being created.

On the other hand, the government is putting limits on the excel load of existing trucks that has for long burdened and destroyed roads across Pakistan. Though this would increase the cost of moving goods, it would insist that trucking companies, freight forwarders and logistic companies will have to upgrade their fleets and procure more vehicles. This might boost demand over the next few months in the commercial vehicle segment, though not immediately.

Copyright Business Recorder, 2019