Cars everywhere!

The recent auto numbers shared by PAMA lend credence to the assertion that no matter what direction Pakistans social indicators take, consumption of normal goods is on the rise. The outgoing month witnessed sales of locally assembled cars and imported LCVs jump by 61 percent compared to the same period last year. This sales tally represents a stupefying leap of 133 percent in July compared to the preceding month because the natural disaster in Japan had affected delivery dates. Buyers were also attracted to make fresh purchases after the government slashed SED by 2.5 percent and GST by one percent in the fiscal budget. However, the cost of production for assemblers has been driven higher by five percent due to an appreciation of nine percent in the value of the yen against the local currency. PSMC passed on this hike in their cost of production to the consumers in the form of increases in car prices between one and 3.7 percent, according to analysts. As agricultural incomes increased during FY11, auto sales were beefed up in rural areas. Pickup and LCV sales climbed by 15 percent and 160 percent during the year compared to FY10. The ever growing population and burgeoning middle class contributed heavily to the increase in sales of small-sized cars below 1000cc, rose by 11 percent on annual and 52 percent on monthly basis. Pakistan Suzuki which had a majority share of 68 percent in the overall annual automobile sales saw an impressive advancement of eight percent and 335 percent over FY10 and Jun-11 respectively. However, the year hasn culminated for PSMC and the company is hopeful of a 20 percent increase by the end of the year because under the taxi scheme announced by the government of Punjab, Suzuki Motors is expected to sell 10,000 units. The companys top management expects that the 39 percent rise in remittances and hefty farm incomes should result in 10-12 percent growth in the sector in the current fiscal year against five percent increase in FY11 from FY10. Improvement in supplies from the Japanese parent companies and launch of CNG models by Indus Motors is also likely to significantly contribute to the growth in demand of autos.