Auto industry slow but sure

To steer the industry away from unforeseen barriers and hurdles, the local auto industry hit brakes a number of times during the last fiscal year. Even though this considerably slowed down the industrys pace, the local car assemblers finally managed to cross the year with a single-digit growth rate. Total car sales (cars and LCVs) stood at 146,496 units in FY11, displaying a modest jump of around three percent. The pace of growth was affected adversely by speed bumps like the floods, relaxation in used car import policy, and supply disruption from Japan, despite double-digit growth in sales over seven months of FY11. On the bright side, higher agricultural commodity prices, along with improvement in consumer confidence, supported the demand for cars. Sales were abnormally weak in the last quarter, taking a knock from supply disruption in April and May and delay in car buying in June on account of announcement of removal of special exercise duty and the reduction in sales tax that will cumulatively decrease car prices by 3.5 percent effective from 1 July. Pakistan Suzuki led the market, with cumulative sales of 79,941 units in FY11; a marked eight percent rise over the previous year. Sales of Alto, Ravi and Bolan remained impressive, while demand for Cultus fell by around 10 percent during the period. Buoyed by demand for Civic and City, HCAR witnessed the strongest sales growth level of 10 percent, selling a total of 15,486 units in FY11. In spite of growth in demand for Cuore and Hilux, INDUs sales level, which had driven the industrys growth last year, remained nearly flat in FY11 as sales stood at 50,015 units. Stagnating sales for Indus Motors are primarily attributable to a five percent drop in Corolla sales. As far as FY12 is concerned, until now there is optimism in the air. The slowdown in production in April and May and delay in buying in June suggests that the market will see strong growth in sales during 1QFY11. That sounds pollyannaish for investors that would make a mint by reaping huge profits in the form of "own" money. With the countrys agriculture sector likely to harvest a good crop this year, the auto industry is bound to register growth. The yellow cab scheme afoot in Punjab alone would help PSMC to realise around 20 to 25 percent growth in sales during the current fiscal year.