Auto industry: seesawing fortunes

The predicament of used imported cars that kept riling up the auto sector for a prolonged period seems to have played down to a great extent by now. Despite that, the recent auto sales numbers released by PAMA do not give the industry any reason to rejoice.
The reduction in the age limit of used imported cars and the new models launched during the period couldn give the industry the boom it lost when it bade farewell to its top selling brands Cuore and Alto. Besides, the termination of Taxi scheme also took its due toll on the industrys sales volume.
During 8MFY13, the sales of the locally manufactured cars which include LCVs, Vans and Jeeps dropped down by 26 percent YoY to tally 82,981 units as compared to 111,889 units in the corresponding period last year. Looking at the stand-alone sales figures of February FY13, there still stays a lapse of 16 percent when compared to February FY12, albeit at that time, the import of five years old cars was allowed. This raises numerous questions on the efficacy of the local auto industry.
However, MoM tally shows some steadiness in sales in the first two months of CY13, touting a meager downtick of one percent from January to February. This clearly depicts an end to the New Year car registration trend which held up the industrys sales during 2QFY13.
Company-wise sales break-up of touts Honda as the cream of the crop, witnessing 78 percent YoY rise in its sales, in the wake of its opponents facing the harsh headwinds. The launch of a new model of Civic in September 2012 resulted in a phenomenal increase of 1.03 times in the sales volume of the brand. Besides, Honda City also boasted a 62 percent sales hike.
On the flipside, sales of Indus motors came down by 36 percent to tally 21,847 units in 8MFY13 as against 34,366 units in the similar period last year. Besides, the discontinuation of its flagship brand Cuore, which proved to be an Achilles heel for the company, Corolla sales also plunged by 34 percent.
Call it a misfortune or the competitors vigilant timing of introducing its new model, Corolla launched last year, on which the company had pinned hopes for its revival couldn lend the needed sustenance to the companys sales. Unlike Honda Civic which targets the elite class, Corolla caters to the masses which are price conscious. After seven to eight percent price hike, Corolla prices are as good as Civic, thus prompting its target class to switch to the cheaper alternative of used imported cars.
To shore up its dwindling sales, Indus Motors has entered a price-heedless niche market by launching "Fortuner", the only locally manufactured SUV with prices at least 35 percent less than its imported equivalents.
Pak Suzuki also faced the fate similar to Indus Motors. Sales of PSMC plunged by 31 percent to 48,328 units in 8MFY13 as against 70,162 units in the similar period last year. The dive in sales is mainly attributable to the termination of Taxi scheme for which Suzuki Mehran and Suzuki Bolan were selected. Besides, the company also took brunt of the discontinuation of its non-Euro II compliant car - Alto. Whats more, a recent uptick in the prices undertaken by the company also snatched away the sales of Liana, Cultus and Swift.
With industry already mired in gloom, the recent amnesty scheme put forth by the government to legalise the smuggled cars adds further fuel to the fire by providing legal cover to the corrupt masses yet again. The FBR has recently issued an SRO under which smuggled or non-duty paid vehicles, which have been seized or voluntarily presented to customs before March 31 would be released on the payment of one percent fine and maximum depreciation up to 60 percent. This is expected to spur the smuggling of cars mainly via Peshawar and Quetta and legalise it by paying a nominal fee.
Whats more, the government is mulling over annulling its earlier decision to reduce the age-limit of the used imported cars to instill competition in the local industry. If this happens, the industry, already infested with numerous problems will experience a grave setback, fading away all hopes of industry revival in FY13.

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AUTO INDUSTRY PERFORMANCE

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                                  8MFY13     8MFY12      chg

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Cars, LCVs, Vans and Jeeps        82,981    111,889     -26%

Trucks and Buses                   1,482      1,762     -16%

Tractors                          31,398     21,940      43%

Motorcycles & Three wheelers     546,636    551,677      -1%

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Source: PAMA

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