Is auto industry on a fast gear?

The demand for cars is growing briskly, with the industrys total car (cars and LCVs) sales accelerating by 35 percent year-on-year to 29,537 units, in the first two months of the current fiscal year. The growth follows a massive drop in car sales in June, when the announcement of the elimination of 2.5 percent SED and one percent cut in GST in the FY12 budget compelled buyers to delay their orders in the last month of FY11. Moreover, the industry attributes higher demand for cars to high agricultural commodity prices and increasing remittances. Pak Suzuki Motor Co. Ltd (PSMC), the countrys largest auto manufacturer, led the pack, with a 67 percent jump in vehicle sales to 18,301 units. Though all of PSMCs variants recorded hefty growth, Swift emerged as a star performer, with sales rising three times compared to the corresponding period, last year. The current demand level doesn reflect the sales under yellow cab scheme proposed to be launched by the Punjab government. Those sales will start reflecting from next month and will last till April 2012. Lady luck is with PSMC as sources have revealed that the government of Punjab intends to hold balloting for another 20,000 cars after the distribution of the first batch of 20,000 cars. Propelled by growth in market appetite for Hilux, Indus Motor Co. Ltd (INDU) registered six percent growth in car sales which rose to 8,829 units in the first two months. The growth came from Hilux double cabin, which is now assembled in Pakistan. Honda Atlas Cars Ltd sales hit speed breakers, sliding two percent to 2,407 units in the first two months. The culprit behind HCARs faltering performance is lower Civic sales, which fell by eight percent. Part of HCARs decline may be attributed to disruptions in supplies from Japan. However, the companys production is expected to resume to normalcy in September. The sales growth in the first two months has lifted the industrys outlook for the current fiscal year. The industry is eyeing a double digit growth in FY12; but, given the fits and starts with which the industry has grown in the last two years; the manufacturers are dicey on the long-term outlook. Moreover, in light of adverse swings in the foreign currency market, the manufactures fear that likely appreciation in Japanese yen will have an unfavourable bearing on their cost of production.