One can imagine that the budget announced for FY15 has been something to look forward to for local automobile assemblers. This column had reflected the same when the budget was announced earlier last month (An auto-friendly budget, dated June 10, 2014) and the recently released annual PAMA numbers suggest why the anticipation was due.
Local car sales remained stagnated for FY14 compared with last year. In the passenger car category, local sales were subdued largely from the decline in Toyota, down by 10 percent.
On the other hand, car sales of Pak Suzuki and Atlas Honda witnessed growth of 2.6 percent and 11.5 percent, respectively.
The growth and decline in Honda and Toyota, respectively, was expected; the share of former rose through the year while consumers held back on sales of the latter in anticipation of its newer model reportedly due this Eid.
According to Tahir Saeed, Research Analyst at Top Line Securities, growth in auto sales has mainly been restrained by inventories of imported cars through the year, higher taxes imposed in budget FY14 (One percent higher GST and 10 percent FED), higher registration and withholding taxes and relaxation of import duties on hybrid vehicles.
Saeed also notes that over the coming year, local car sales will be triggered by the Punjab Yellow Cab Scheme (boosting sales for PSMC), launch of Corolla’s new model as mentioned above, and removal of ban on the import of CNG kits, which had been imposed earlier during December 2013.
Further, a significant factor to push sales of locally-assembled cars this year will be imposition of 10 percent duty on imported used vehicles.
As it is, inventories of these vehicles have been falling since the government reversed their allowed age limit from 5 years to 3 years.
Regardless of the trajectory of car sales in the country, one finds that auto-loan off-take has continued an upward trend over the last two years, a question that we leave for a subsequent inquiry.
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