It seems local auto assemblers will not take competition from any new player that joins the field lying down. As Lucky and Nishat finalize their plans on their respective assembly plants, car sales for existing assemblers are thriving. According to numbers reported by Pakistan Automotive Manufacturers Association (PAMA), car sales increased by 29 percent in 5MFY18 year on year. Overall auto sales together with commercial vehicles and tractors grew by 33 percent during this period.
Greater car sales have been bolstered by affordable auto financing. Between Octobers of 2017 and 2016, financing for cars rose by 29 percent according to the Central Bank’s database. Meanwhile, imports for vehicles in CBU and SKD/CKD form (Completely Built Units, Semi/Completely Knocked Down) have also grown significantly despite regulatory measures including regulatory duties taken by the government to curb the former.
CKD/SKD import grew by 29 percent for cars in the July to Oct period of this fiscal year according to data by Pakistan Bureau of Statistics (PBS). CBU imports increased by 83 percent for cars. The government believes we will start seeing the impact of the import discouraging measures from January, so we will be closely monitoring the numbers.
Pakistan Suzuki Motor Company (PSX: PSMC) has performed remarkably well over the past five months with the introduction of its new Cultus while WagonR sales are now 20 percent of all Suzuki sales against 14 percent this period last year. Both variants face strong competition from import varieties in the under 1000cc engine league that have been growing ceaselessly over the past year.
Suzuki has also been testing with CBU imports of Ciaz and Vitara in the sedan and SUV markets. Both are popular vehicles in India but we don’t have access to sales number here to gauge market response. But safe to say, Suzuki is contemplating getting into other niche markets which remain underutilized.
Honda Atlas Cars (PSX: HCAR) has been outperforming the other two since it launched not only a new civic but a crossover SUV that gives the feel of a powerful car but doesn’t cost as much as other SUVs. Customer reviews suggest that it is a good family car and safe for travel in mountainous lands. Starting production toward the last quarter of FY17, Honda has now sold over 4,000 units of Br-V during the five month period of this fiscal year, and seems to be a better fit for Pakistani car buyers. The larger SUV Fortuner sales stood at 1,400 units comparatively, also costing nearly double of Br-V.
On the other side of the sedan market is Indus Motor Company (PSX: INDU) which is investing in capacity expansion to meet growing demand. Corolla sales have been down since the company has faced production constraints. Customers are also awaiting a face lift. The rising appetite for SUV is evident with not only Br-V sales but Fortuner, which has soared as we kicked off FY18. Meanwhile, the new Hilux-Revo sales jumped up by 34 percent. Despite seeing a reduction in its market share down to 24 percent (5MFY18: 29%), its high margin Hilux and Fortuner, together with capacity enhancement will ensure it still has a big chunk of the market going forward.
The new car ventures—of which Renault’s plans are still unclear—will be setting up new assembly plants and though we hear that CBU imports will be starting soon, it will take 2-3 years for any of these players to find their footing (Read “Car economy: the myths of competition”, Dec 7) and give real competition to existing assemblers. If they do, we are all for that, but recent activity of the three players shows they will not let go without a fight.
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