AGL 24.40 Increased By ▲ 1.46 (6.36%)
AIRLINK 109.29 Decreased By ▼ -2.00 (-1.8%)
BOP 5.29 Increased By ▲ 0.04 (0.76%)
CNERGY 3.67 Decreased By ▼ -0.05 (-1.34%)
DCL 8.00 Increased By ▲ 0.01 (0.13%)
DFML 44.30 Increased By ▲ 4.03 (10.01%)
DGKC 88.80 Increased By ▲ 0.80 (0.91%)
FCCL 21.99 No Change ▼ 0.00 (0%)
FFBL 42.28 Increased By ▲ 0.08 (0.19%)
FFL 8.90 Increased By ▲ 0.35 (4.09%)
HUBC 151.70 Decreased By ▼ -1.59 (-1.04%)
HUMNL 10.35 Decreased By ▼ -0.10 (-0.96%)
KEL 4.45 Decreased By ▼ -0.05 (-1.11%)
KOSM 3.95 Increased By ▲ 0.10 (2.6%)
MLCF 36.60 Decreased By ▼ -0.20 (-0.54%)
NBP 49.16 Increased By ▲ 1.17 (2.44%)
OGDC 131.70 Decreased By ▼ -0.10 (-0.08%)
PAEL 26.31 Increased By ▲ 0.16 (0.61%)
PIBTL 6.07 Increased By ▲ 0.04 (0.66%)
PPL 115.45 Decreased By ▼ -0.05 (-0.04%)
PRL 22.67 Increased By ▲ 0.07 (0.31%)
PTC 12.50 Decreased By ▼ -0.08 (-0.64%)
SEARL 56.19 Increased By ▲ 0.50 (0.9%)
TELE 7.40 Increased By ▲ 0.20 (2.78%)
TOMCL 37.69 Increased By ▲ 0.69 (1.86%)
TPLP 8.34 Increased By ▲ 0.49 (6.24%)
TREET 15.33 Increased By ▲ 0.03 (0.2%)
TRG 59.96 Increased By ▲ 5.41 (9.92%)
UNITY 32.34 Increased By ▲ 0.48 (1.51%)
WTL 1.18 Increased By ▲ 0.01 (0.85%)
BR100 8,406 Increased By 61.8 (0.74%)
BR30 26,453 Increased By 106 (0.4%)
KSE100 79,397 Increased By 409.9 (0.52%)
KSE30 25,518 Increased By 153.1 (0.6%)

In a great display of resilience, automobile sales have remained consistently strong on May 24 after delivering a worthy performance in the previous month as well. That’s two consecutive months of selling over 10,000 units—setting the highest record in 15 months of low volumes—spread across passenger cars, LCVs and SUVs. Compared to May 23, it’s a 100 percent recovery. Price cuts perhaps had a hand in the matter. But anyone expecting this to set the tone for FY25 may have a rude awakening in store for them.

For one, a substantive recovery hinges on SBP’s monetary policy going forward. Given the Central Bank is hesitant to give a firm direction on forward inflation—treading with extreme caution still after cutting the rate for the first time in 4 years—it seems unlikely that the rate cuts over the next fiscal year will be significant enough to boost automobile financing. Though it would be welcome for sure, lower rates are not on the horizon for now which leaves a major portion of the market demand staying untapped. Additionally, a strict stance on imports to keep current accounts in check does not invite confidence that auto financing will be encouraged. The SBP has already tightened regulations on car financing before to reduce demand.

An even bigger deal is the changes in the less-than-inventive budget that the government has just announced. A mammoth, IMF-friendly tax target forced the government to make hasty changes by imposing higher taxes on salaries and consumptions, as well as non-filers. Cars for instance will now be taxed based on their price. Taxes will have an inflationary impact broadly, and on cars specifically. Even if the increased price of cars has no impact or a delayed impact on volumes, reduced purchasing power certainly will as cash purchases become harder than ever.

In 11MFY24, total volumetric sales in the industry have slid 25 percent compared to the same period in FY23, and much higher—64 percent—compared to the same period in FY22. In other words, only two years ago, car sales were 2.8 times what the industry is selling today with more models and variety in the entirety of the fleets assembled combined.

There are no signals at present that suggest that the government wants demand to resurface or improve. The economy is simply not prepared for it and the tightening noose on fiscal policy is only one way to confirm the diagnosis that—it’s not over.

Comments

200 characters
KU Jun 21, 2024 10:55am
Only shows that elites n govt are steady customers, even when these manufacturers do no pass the US/EU quality and safety standards. We live in a land that is best place for business without rules.
thumb_up Recommended (0) reply Reply
AF Jun 21, 2024 11:16am
Kia not mentioned?
thumb_up Recommended (0) reply Reply
Fiyaz Ahmed Jun 22, 2024 04:39am
Most local assembled cars have good reliability standards. With regular maintenance 4 to 5 years won't see any breakdowns.
thumb_up Recommended (0) reply Reply
HASSAN ARIF Jun 22, 2024 10:30am
@AF, KIA is not a member of PAAPAM
thumb_up Recommended (0) reply Reply
Arsalan Jun 24, 2024 06:30am
car prices in Pakistan are insane and the quality 3rd class. they cant even be exported in Africa. they r a nuisance. An imported 660 cc is far better n have more options then these worthless cars
thumb_up Recommended (0) reply Reply