Car sales rise in 2011
January 20, 2012
Despite weak economic indicators, tough competition and lack of government support, the local auto industry witnessed strong numbers and sales in the calender year 2011 improved as last year. The car sales increased by 20 percent to 81,931 units in first half 2011-12 compared to 68,099 units in the same period last year. According to the latest PAMA figures, industry auto sales (car, LCV, and pickup) in July-December 2011 have improved by 20 percent on year on year to 81,931 units. Pak Suzuki posted enormous growth of 32 percent year-on-year (YoY) to 50700 units.
Similarly, Indus Motor registered a growth of 7 percent YoY to 24,100 units. However, Honda’s unit sales were stagnant at 6,900 units during first half 2011-12. “Yellow cab scheme announced by the Punjab government played its due role in this volumetric growth, while the government has also given some tax incentives to car manufacturers,” said Nauman Khan, analyst at Top Line securities.
In December, car sales dipped by 6 percent to 11,214 units compared to 11,924 units in preceding month, as buyers prefer to defer orders due to year-end phenomenon. However, sales in December showed a phenomenal growth of 25 percent as against the same month last year.
On company wise basis, Pakistan Suzuki Motor Company (PSMC) continued to show robust growth of 32 percent in first half 2011-12 to 50,718 units versus 38,320 units seen in the same period last year. This growth trajectory primarily stems from higher sales of Mehran and Bolan, up 47 percent and 36 percent respectively, on account of taxi scheme launched by Punjab government, while comparatively new addition in PSMC product offering, Swift, also lend its due hand.
Swift sales increased by 2 folds to 3,247 units in the period under review while it is contributing 6 percent to overall PSMC volumetric sales. Overall, company has been able to improve its market share to 62 percent in this period. On the other hand Indus Motors sales grew by 7 percent to 24,066 units compared to 22,408 units in same period last year with company’s flagship product Corolla depicting the same growth trend. Despite launch of new variants by the company in 1600cc segment and CNG vehicles (Eco), corolla sales showed declining trend on account of reduced farmer income amid falling cotton prices.
The analyst said despite recovery in volumetric sales, strained margins on account of continuous appreciation of Japanese yen and high regulatory risk we maintain “Market-weight” stance on local assemblers.
Sarfaraz Abid, another auto analyst said, “the volumes lent support due to a low base effect from last year where initial impact of floods hurt the consumer power, while high farm level income supported the total sales during FY11.
Moreover, during 1H FY12, volumes continued to stay strong as they went up by 21 percent YoY to 81,645 units on account of higher sales after cut in GST and SED. Furthermore, Honda Atlas Car depicted a bleaker picture where the company posted no production during the month which is most likely due
to supply disruption for important parts from Thailand, as a result it witnessed increase in prices by Rs 20,000 – 30,000, he said. The analyst said optimistic sales figure will be a good push to take FY12’s sales to a higher level despite floods in Sindh and partial supply disruption from Thailand’s floods.
The auto analysts said beside the low base effect, the substantial volumetric growth can be attributed to the incentive announced by the government to local auto manufacturers in terms of removal of Special
Excise Duty (SED) of 2.5 percent on imported and manufactured vehicles coupled with reduction in General Sales Tax (GST) from 17 percent to 16 percent. Honda Atlas Cars has been facing parts shortage since October because of floods in Thailand from where the company receives the completely knocked down (CKD) kits.
Industry sources said that the local auto players are already in trouble and if the government does not improve the gas load shedding situation across the country than they may face another setback as decline in CNG cars will be obvious in coming future.
They urged the government to restore CNG to all stations continuously for the transport system so that this risk could be minimized. It is pertinent to mention that he government intends to make the existing
policy regime more flexible for the new entrants in order to attract foreign investment. Sources said that if government intends to stand on same policy it will have to end all problems of local players first.
The Automobile industry of Pakistan has enjoyed tremendous growth in the past few years however, owing to the global economic recession and a tight monetary policy by the state bank, a decrease in the overall demand of automobiles has been witnessed during the year.
The automotive sector of Pakistan, despite significant production volumes has lacked in transfer of technology. As of 2011, the industry has not adopted any automobile emission or safety standards. Most cars produced still rely on the obsolete carburetor based technology. There are only three major competitors in the industry, namely PakSuzuki, Indus Motors and Honda Atlas.