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KARACHI: Rising freight charges and ongoing rupee depreciation have not only put car prices under pressure, but will also be the reasons for the overall market to see a minimum 10 to 15% reduction in sales in the coming fiscal year, said Indus Motor Company (IMC) CEO Ali Asghar Jamali.

“I see the overall market going down by 10 to 15% minimum next (fiscal) year,” Jamali told Business Recorder.

Jamali’s remark comes as it was reported that IMC – makers of Japan’s Toyota-brand vehicles in Pakistan – is expected to hike prices in the range of 12-15% no later than June, as it looks to pass on the impact of rising freight charges and currency devaluation. While the rupee has hit record lows in recent days, closing over the 181 level against the US dollar for the first time on Monday, international freight charges have increased in the range of 500-700% over the past couple of months, according to a former official of the Pakistan International Freight Forwarders Association Malik Moin who was cited in a local report.

“Freight is the major component. But the market volume will also go down due to the current situation of the country,” added Jamali.

IMC reported a profit-after-tax of Rs10.17 billion in six months of the ongoing fiscal year (July-December 2021), translating into earnings per share (EPS) of Rs129.45. In the same six-month period of the previous year, its profit-after-tax stood at Rs4.8 billion (EPS of Rs61.08). However, the company’s gross margins have declined by 320bps on a quarterly basis, from 10.8% in July-September 2021 to 7.6% in October-December 2021.

In a recent briefing reported by brokerage house Topline Securities, the company said margins are expected to remain depressed given higher commodity prices, rising freight charges, and currency depreciation.

Pakistan has seen impressive growth in auto sales during the ongoing fiscal year, with volume of passenger cars and light commercial vehicles clocking in at over 178,000 units in just eight months of 2021-22. The number is expected to be higher since figures from some automakers are not included in the dataset reported by the Pakistan Automotive Manufacturers Association. In comparison, this number amounted to under 114,000 in July-February of 2020-21, 57% lower year-on-year.

In February 2022 alone, sales clocked in at 21,706 units – the second-highest figure for this particular month in the last 14 years – according to data compiled by brokerage house Arif Habib Limited (AHL).

However, many believe the gradual rolling back of incentives announced after the federal budget last year, increase in interest rates due to high inflation, and rupee depreciation will eventually cause the auto sales figure to contract.

Automart: car prices in Karachi

Bilal Memon

Bilal Memon is the Head of Digital Content at Business Recorder. His Twitter handle is @bilalahmadmemon

Comments

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Tariq khan Mar 22, 2022 01:13pm
If the rates become higher then sale will be effected badly specially on top of the line vehicles , as in market different makers be launched.
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Tariq khan Mar 22, 2022 01:16pm
Due to higher rates sale will be effected. Market competition is in order.
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