Auto sales down 4% in July-March 2018-19

KARACHI: Auto sales clocked in at 185000 units, down by 4 per cent year on year (YoY) in first nine months (July-March) 2018-19. This decline can be attributed to slowdown in economy and rise in recent car prices.

Pakistan Auto sales are up by 2 per cent in March 2019 (+16 per cent MoM) led by higher sales from Pak Suzuki Motor Company (PSMC).

Indus Motors (INDU) reported 11 per cent YoY decline during March 2019 mainly on account of lower sales of Fortuner & Hilux, which were down 63 per cent and 65 per cent, respectively, YoY.

This was due to 10 per cent Federal Excise Duty (FED) imposed on above 1700 CC engine cars. Corolla sales posted growth of 2 per cent YoY.

Pak Suzuki (PSMC) reported 23 per cent YoY growth in sales led by growth in Wagon R with growth of 63 per cent YoY. Other major contributors in overall growth were Cultus, Bolan and Ravi, up by 17 per cent, 38 per cent and 36 per cent YoY, respectively. Swift was the only PSMC variant to record decline, down 16 per cent YoY.

Honda cars (HCAR) sales fell 29 per cent YoY in March 2019, steepest YoY decline during a month since May 2012. In addition to economic factors, decline in City and Civic variants is attributed to anticipation of a launch of new variant (Civic 1.5 Turbo new variant launched in April-19).

Going forward, overall demand of automobiles is expected to remain subdued due to recent hike in policy rate (+475bps since Jan 2018 to 10.75 per cent), resulting in higher borrowing cost for auto financing.

Furthermore, incremental cost as a result of rupee devaluation & increasing inflation has led to higher car prices, impacting purchasing power of car buyers.

To note, the Government is mulling over removal of 10 per cent FED on engines with 1700CC above, as per news reports. However no official announcement has yet been made, adding to the uncertainty to the car sales with engine size of over 1700CC.

Pakistan’s auto sales are foreseen to be influenced by following: (i) Two policy amendments are anticipated to bode favorably for Pakistan’s auto sales – one allowing non-filers to purchase locally assembled cars irrespective of engine capacity and the other requiring that taxes/duties on used vehicles be paid in foreign exchange or be remitted from abroad to the person importing the car.

 

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