Pakistan Suzuki (PSX: PSMC) is in a league of its own—it has little local competition because of the different variety of its fleet but does probably get hurt the most from imported used cars among the three carmakers. Despite pressures from that area, and the fact that after the Apna Rozgar Scheme wrapped up, Bolan and Ravi sales showed a sharp drop—the company’s overall sales showed an 8 percent growth in the second quarter (April-June) of the calendar year. This translated into a top-line growth of 21 percent in Q2CY17 year on year.
The company’s new Cultus seems to be doing remarkably well despite the higher price tag while Wagon-R sales have been rising substantially, nearly doubling in the April-June period CY17 against last year. Wagon-R seems to be in direct competition with other imported smaller cars in the market but has been holding its own despite a recent price bump.
The company is planning to introduce Alto-660, and replace the timeless Mehran off its fleet. The company already discontinued the booking of CNG-fitted Mehran variants since the first week of July. Meanwhile, PSMC introduced Suzuki Ciaz into the mix in view of the demand in the higher engine category, but it is unclear whether this car will find a market enough to be locally assembled. (Read our earlier story on PSMC: In autos: show, not tell, May 9, 2017).
Margins squeezed during the quarter due to higher costs likely because of the increase in steel prices as well as the appreciation of Japanese Yen against the greenback, making imports expensive for carmakers. But still, the company managed to see a growth of 40 percent in its bottom-line.
Going forward, the new Orange Cab scheme launched by the Punjab government will inject a strong boost to sales for Wagon-R, and Bolan. The company was planning to invest in the auto sector to the tune of $600 million but could not come to an agreement with the government on incentives. Even though that investment did not work out, PSMC is still very much in the game and even when new car ventures enter the playing field, the company will have the least to lose. The smaller car category remains PSMC’s niche.
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