Imports (in dollar value) are growing much faster than volumes here locally. Imported cars (in dollar value) in complete business unit (CBU) form have almost tripled in 11MFY21 according to the data reported by the Pakistan Bureau of Statistics (PBS) against completely knocked down (CKD) imports that grew by 2.2x. This has translated to an increase in unit sales of domestically assembled cars and LCVs by 62 percent. Though trade volumes for cars are not available, a close proxy for per unit increase in CKD is comparing assembled units versus the imported dollar value which shows a 40 percent growth in CKD per unit in 11M year on year (average dollar is on the same level for the period as the corresponding period last year).
The higher cost of CKD (per unit) is reflective of the change in product mix in the market—SUV and cross-overs are on a roll. With the exception of Picanto, new vehicle launches have almost exclusively focused on higher-end sedans, SUVs, cross-overs and LCVs segments. Though numbers for Kia and several Chinese players that have launched cars recently are not included here, even for just volumes reported by PAMA members, SUV and LCV segment reports the highest share in the market over the past few years in year-to-date FY21. If Chinese models were included, the SUV and cross-over share might be even higher. The sedan/1300cc segment continues to stay in the lead as low to mid-engine cars slowly lose steam.
In the lowest passenger segment, in fact, after Mehran’s exist, Suzuki Alto stands invariably alone. One could throw Prince Pearl and United Bravo into the mix but they have barely created a market for themselves. A little further up, Wagon-R’s hype has also significantly subsided which was once rivalling Mehran-level volumes due to the emergence of ride-hailing apps. Kia’s Picanto in the mid-range category may be the only worthy contender that has continued to grab market share despite a reasonably high price tag.
Meanwhile, used cars that were the savior for middle-class buyers in the absence of local variety have also all but shut down. Imports have dwindled down to a few handful of cars in the market sold by dealers who have been able to circumvent and/or meet the new custom requirements imposed by the government for duties to be paid in dollars.
The government’s decision to slash sales tax and FED on small cars could certainly boost sales for Alto and Bolan apart from some Chinese models in the market. This would compensate for the price hikes that consumers have faced over the past two years. If these concessions extend to 1000cc cars, the share of low-to-mid range cars will recover specially considering the reduce cost of borrowing on auto loans.
Chinese players are taking on losses to create space by introducing SUVs and crossovers that are priced closer to sedans with all the bells and whistles in terms of features and technology. Though they might not be competing with existing OEMs on volumes just yet, as more car buyers take a leap of faith on the Chinese vehicle, market acceptability may grow which could put pressure on OEMs that yield all the power; but none of the responsibility.
If cars have to be promoted in this country—given how bad they are for the environment—the focus should be to extend the reach of the middle-class buyer whilst pushing automobile companies to introduce not only a greater variety of models, but variety across different engine sizes.