Could this be the year of the auto sector? The sector kicks off this fiscal year with a massive gusto—witnessing growth of 50 percent in sales for cars, jeeps, pickups, tractors and LCVs in July 2017 against this month last year. According to numbers reported by the sector’s very active association Pakistan Automotive Manufacturers Association (PAMA), growth for locally manufactured cars just one month in is starting to meet expectations.
This is especially interesting because PAMA does not report many other brands that are manufacturing locally (re. Chinese FAW), or are selling their vehicles in Pakistan through authorized dealers (re. Volvo, Mitsubishi, Sino, JAC, Daewoo, BMW etc.). Many new vehicle ventures have already come in including bus service companies like Faisal movers and Bilal Travels. FAW just launched its newly minted local V2 and it has expanded capacity to manufacture its flagship trucks and prime movers. The actual sales in the sector must be higher.
Some could attribute the 42 percent increase in car sales to the lower number of days in July last year due to Eid, but it has been clear for a while that the sector is taking a turn. Existing carmakers have done their homework. (Read “Auto: Taking flight”, published on July 13, 2017).
Pakistan Suzuki Motor Company (PSX: PSMC), sole manufacturer of smaller cars sold 37 percent more cars in July of this year compared to last. This has been brought by strong sales of customer favourite WagonR and surprisingly great response for the new Cultus despite the heftier price tag. Bolan and Ravi both also grew substantially. Despite shelving plans to invest in a new plant, after not coming to an agreement with the government on concessions, the company is still soon launching a new Alto, which would replace Mehran. Orders for CNG-fitted Mehran have already been stopped.
PSMC also introduced SUV Vitara and compact high engine Ciaz to the market hoping to tap into the luxury market. Sales for these cars are not recorded under PAMA but we will know how the market responded when the company decides whether to locally manufacture them or not. The Orange Cab scheme of the Punjab Government is expected to further boost sales for PSMC.
Indus Motor Company (PSX: INDU) is expanding capacity. Car buyers are waiting for the face-lift launch of the flagship variant Corolla in August so sales in July has been lower. New Hilux and Fortuner however more than made up for it.
Honda Atlas Cars (PSX: HCAR) is the star performer more than doubling its sales in July 2017 against July 2016 having launched the new Civic, and an SUV which has garnered much attention from the crowds. A model upgrade for Honda City is in the works. Honda’s share in the three car market has increased from 15 percent in 1MFY17 to a whopping 23 percent in 1MFY18.
Though cars and jeeps take up most of the share of all auto volumetric sales, commercial vehicles aren’t far behind. The robust demand is the direct result of the boom logistics and transport industry is beginning to see, not just because of CPEC but the general rise in economic activity. Logistics will grow as consumerism, retail, construction activities pick up.
Freight forwarding companies and logistics players will be upgrading and expanding their fleets. It then makes sense that LCVs together with tractors constituted 31 percent of all auto sales in 1MFY18 against 27 percent last year. There is no denying that the growth in economy will push the auto sector to expand in many directions—not only in terms of volume and quantity produced but the ability to bring quality and variety into the mix too. And when the likes of Renault and Audi come calling, optimistically, it can only be the beginning.
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