Car sales: resilient despite tough conditions

Despite an industry-wide increase in car prices, the growth trend that car manufacturers have experienced over the last year persists in CY12. The latest data released by Pakistan Automotive Manufac-turers Association (PAMA) shows a growth of 17 percent in 7MFY12 compared to the same period last year. On a month-on-month basis, a 38 percent increase was seen in January 2012, owing to the new year registration effect i.e. purchases deferred in December made in January to get the new year registration, which helps a cars resale value. Category-wise, the largest increase was seen in the 800cc to below 1000cc segment which grew by 30 percent in 7MFY12 compared to the same period last year. Following the small car segment was the 1000cc segment, which saw an increase of 28 percent over the same period. The 1300cc and above category was the worst performer, which grew by a mere 4 percent in 7MFY12 compared to 7MFY11. On the back of the complete shutdown of Honda Pakistan due to supply disruptions from Thailand, poor performance was seen in the luxury car segment. According to BR Research analysis, the growth in the 1300cc and above segment would have been 7 percent higher than the level achieved, had there been no suspension in production of Honda. In addition, suspension of Honda, which has about 12 percent share in the total passenger car segment led to a 4 percent lower growth rate in total passenger car sales (that stood at 17percent) than BR Researchs expectation. Company-wise, in 7MFY12, PSMC experienced the largest increase, the growth being largely led by sales made under the yellow cab scheme and the success of swift". The sales of swift in 7MFY12 stood at 3,847 units compared to 1972 units sold in the same period last year. Honda on the other hand saw a decline of 26 percent in 7MFY12 compared to the same period last year. The sales of Indus Motors rose by 4 percent in 7MFY12, which analysts attribute to the decrease in farm income due to an increase in fertilizer and other input costs and a simultaneous decrease in prices, especially of cotton. Uptil now, local car makers had been resilient despite the currency devaluation and inflationary pressures. However, the recent flooding of imported cars into the local market, price increase of local cars and weak economic prospects threaten the performance of car manufacturers in the next quarter.