Textile and Auto Manufacturing Struggle Amid Demand Decline in 2023

The economy of Pakistan has continued to face hardships as two more industrial units announced that they would observe a partial shutdown in the face of thin demand for textile and automobile industries.

Textile Industry Closure

On Monday, Shahzad Textile informed the Pakistan Stock Exchange (PSX) that due to reduced yarn demand and economic challenges.

The indefinite closure of yarn-making units poses a significant threat to the country’s economy, particularly because the textile industry is a cornerstone of Pakistan’s economic stability.

Textile accounts for approximately 60% of the total export proceeds, making it the largest contributor to the nation’s export earnings.

With these yarn-making units shutting down indefinitely, there is a heightened risk of economic instability, as the textile sector’s performance directly influences the overall economic health of the country.

Textile Industry Urgent Economic Concerns

This development raises concerns about reduced export revenues, potential unemployment, and overall economic downturn, underscoring the critical need for swift and effective measures to address this issue and mitigate its adverse impact on the nation’s economy.

Inside Look of a textile factory

Furthermore, industry officials have noted a substantial rise in production costs, exacerbated by escalating energy tariffs. This situation has severely hampered Pakistan’s competitiveness on the global stage.

The soaring energy prices have not only inflated operational expenses for businesses but also put immense pressure on the overall cost of production.

Rising Production Costs

As a result, Pakistani products face challenges in terms of pricing, making them less attractive to international buyers.

This increase in production expenses, coupled with the existing economic challenges, has created a detrimental environment for businesses, impacting their ability to compete effectively in the international markets.

Addressing these issues is imperative to restore Pakistan’s competitive edge and bolster the country’s position in the global economy.

Automobile Industry Woes

In another development, Agriauto Industries announced that it was going for a partial closure of its auto parts manufacturing plant in the current month.

The auto parts vendor, however, did not elaborate on whether it would reduce working hours or the number of working days.

AHL Research auto analyst Muhammad Abrar Polani said as consumer affordability worsened due to a tough economic environment, the demand for automobiles shrank, resulting in a trickle-down impact on the demand for auto parts.

The surge in interest rates has further exacerbated the situation by significantly diminishing the demand for auto financing, leading to a noticeable decline in auto sales.

Previously, the accessibility of financing options at reasonable rates played a crucial role in stimulating the growth of the auto industry.

Challenges and Price Hikes in Pakistan’s Auto Market

However, the recent increase in interest rates has created a deterrent for potential buyers, making it financially burdensome for them to invest in new vehicles.

This shift in the financial landscape has disrupted the market dynamics, causing a ripple effect across the auto industry.

Inside Look of an automobile factory

The reduced affordability, coupled with the shrinking availability of favorable financing, has become a substantial obstacle for both consumers and the auto sector alike.

Addressing these challenges is essential to revive consumer interest, promote sales, and rejuvenate the once-thriving auto industry.

With the rupee continuing to strengthen against the dollar in the interbank and open markets since Sept 5, Pak Suzuki Motor Company Limited (PSMCL) has announced price increases of Rs17,000 and Rs18,000 for two models, effective from Oct 1.

The new prices for GD-110S and GS150 are Rs 352,000 and Rs 382,000, respectively.

Sales Plummet Amid Economic Challenges

While the two-wheeler plant remained shut from Sept 1-15 followed by Sept 20-22, PSMCL had raised the prices of its two models, GR-150 and GSX 125, by Rs11,000 and Rs26,000 to Rs547,000 and Rs499,000 from Sept 15.

Assembly point in bike factory

The country’s total oil sales in September plunged by 28 percent month-on-month (MoM) and 34pc year-on-year (YoY) to 1.01 million tonnes, while sales for IQFY24 fell by 16pc to 3.77m tonnes.

According to Arif Habib Limited, petrol, high-speed diesel (HSD), and furnace oil (FO) sales stood at 0.52m tonnes, 0.39m tonnes, and 0.08m tonnes, respectively, during Sept, depicting a MoM drop of 23pc, 28pc, and 28pc, and a YoY fall of 18pc, 24pc, and 72pc, respectively.

During July-Sept FY24, sales of petrol, HSD, and FO clocked in at 1.85m tonnes, 1.44m tonnes, and 0.35m tonnes, showing a drop of 1pc, 2pc, and 65pc, respectively, compared to the same period last fiscal year.

One response to “Textile and Auto Manufacturing Struggle Amid Demand Decline in 2023”

  1. […] the humming textile mills, there are faces, not just machinery—faces of dedicated individuals whose tireless efforts and […]

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