KARACHI — Pakistan's auto industry is experiencing a sales decline, industry sources say, with a total of 38,000 vehicles sold last year, indicating capacity utilization of only 40%.

Automakers in the country include Toyota Motor Corp., Suzuki Motor Corp., Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Hyundai Motor Co. Ltd.

Sales of 0.8L cars saw the sharpest plunge, from 16,000 units in the 1998-1999 fiscal year to about 8,000 during the last fiscal year, ending in July.

Industry observers blame the fall on the introduction of small cars, such as the Hyundai Santro, whose prices are too high to match the purchasing power of prospective middle-class buyers.

They also say the government should provide incentives to local manufacturers to lower and stabilize skyrocketing prices of automobiles. The auto industry agrees, saying efforts should be made to further boost its important revenue-generating sector.