Booming car sales

The automobile manufacturers of Pakistan are showing resilience despite fueling inflation, worsening law and order situation, and surging car prices. The latest numbers released by Pakistan Automotive Manufacturers Association (PAMA) show that the passenger car segments sales grew by 20.52 percent in the 1HFY12 compared to the same period last year. Largest increase almost 32 percent was seen in the 800cc and below 1000cc category in 1HFY12 over the same period last year. Following this was the 1000cc category which showed a handsome growth of about 22 percent in 1HFY12 compared to same period last year. Both these categories are dominated by Pak Suzuki Company. Economists believe that the strong growth in the small and medium car segment reflects good income of the middle class. However one should keep in mind the purchases made under the yellow cab scheme as they account for a considerable portion of the small car segment sales. Up till now around 7500 cars have been delivered under this scheme and a large number is still pending. The luxury car segment (1300cc and above) grew by 11 percent in 1HFY12 over the same period last year. Analysis shows that the growth rate would have been close to 15 percent if there would not have been a complete suspension in production in Honda Pakistan. The complete shutdown of Hondas Thailand plant (an important part provider of Honda Pakistan) due to floods in the region has forced Honda Pakistan into complete suspension. While talking to BR Research a company employee said that the effect of floods would stay in the 3rd quarter of FY12 as the company would not be able to start production until February. Like always, Pak Suzuki outperformed its peers, it managed to sell 43,121 units in 1HFY12, compared to 31,095 units sold in the same period last year this is a roughly 39 percent increase. The sales for Honda saw almost no change in 1HFY12 over 1HFY11.The growth rate for Honda would have been roughly 18 percent if there would have been no disruption in supplies. Indus motors sales grew by only 1 percent in 1HFY12 compared to 1HFY11 due to slowdown in Coure sales. Car manufacturers however are very skeptical about the coming half. While talking to BR Research, the official spokesperson for Pak Suzuki Mr.Shafiq Ahmed said that the ban imposed on import of CNG cylinders would direly affect the sales of Pak Suzuki as the major target market for Suzuki cars is the middle class which cannot afford petrol. Other factor hindering the sector is the rupee depreciation, auto makers attribute the recent price increase to the weakening of rupee. Another factor that would be affecting the sector, especially Pak Suzuki is the Euro 2 emission standards. The ban on import of CNG cylinder and imposition of Euro 2 standards promise a lot of changes in the auto sector in coming times.