Automakers feel Japan aftershocks

As expected, local car assemblers have begun to feel the crunch of slowing supplies in the aftermath of the earthquake and tsunami that ravaged Japan. Stunted production due to depleting local inventories and delays in procurement from abroad resulted in industry-wide production falling by a whopping 24 percent in April compared to the last month, tallying at 13,021 units.
Similarly, industry-wide sales have also started to simmer down. In April, 13,831 units were purchased, showing a decline of 11 percent over the month of March.
In terms of individual assemblers, the biggest pinch was felt by Pakistan Suzuki Motor Company (PSMC), whose aggregate sales and production fell by 22 percent and 33 percent, month-on-month, respectively.
KASB analyst Saqib Sajjad highlighted that part of this decline was expected because PSMCs sales shot up in February and March as it "delivered pent-up orders after removal of a ban on CNG kits produced by Faber".
Indus Motor Company (INDU) managed to post a modest increase of 10 percent in sales during April when compared to March despite a 9 percent decline in production over the same period.
However, only the sales of Corolla increased by 6 percent during this period, while purchases of both Cuore and Hilux plummeted by 33 and 39 percent, respectively. Assembling of Corolla and Hilux slipped by 6 percent each in April compared to the previous month, while the same tally for Cuore was squeezed by 30 percent to 298 units, close to the level of production from a year ago.
Surprisingly, production of Honda Car Company (HCAR) has been relatively unscathed so far. The local assembler put together 596 Civics in April, 10 percent fewer than the month before. Supply of Honda City was also stable as 986 units were assembled in April compared to 981 units in March.
While it is evident that the production of cars had already started to slow down in April, industry stakeholders and analysts concur that the squeeze will only get tighter in the summer months.
"Since the data released by PAMA reflects only deliveries of those vehicles booked earlier, it is yet to completely reflect product disruptions faced by the local auto industry," commented JS Global analyst Atif Zafar.
Indeed, all three companies have stated that production will be stunted at least till June due to delays in the shipment of parts from Japan. INDU has also stopped accepting bookings for the time being.
On the flip side, demand for cars and LCVs is likely to gain strength in the coming months because of rising agricultural incomes and the upcoming harvest season.
While assemblers will likely remain unable to meet the growing demand until supplies normalise from Japan; prices of locally assembled cars have already been raised in recent weeks.
Under the current scenario, it appears likely that the rising chasm between demand and supply may provide profitable opportunities to importers of cars, especially in view of recent relaxations in rules pertaining to the import of cars to the country.