Passenger cars and jeeps have crossed the 150,000 threshold in 8MFY18 year-on-year — at the same rate, the industry could reach and cross the 200,000 mark in sales in the passenger vehicle category.
Data reported by Pakistan Automotive Manufacturers’ Association (PAMA) shows locally assembled passenger cars, jeeps, commercial vehicles and tractors grew by 26 percent in the period with pickups, 1000-cc cars and tractors witnessing the highest growth rates among segments.
In February, passenger cars’ sales grew by 11 percent year-on-year even though all of the three assemblers raised prices by an average of 3-4 percent after the rupee devaluation. In fact, Suzuki came back again in March to raise prices even further for some of its variants, with a hefty bump of 6 percent on Wagon-R after introducing some cosmetic changes (“Suzuki’s double price hike”, published on March 7, 2018).
Demand for cars. However, are standing strong. Completely Built Units (CBU) imports for cars grew by 40 percent in July-Jan period year-on-year whereas the monthly average for local passenger car sales is nearly 18,000 units against a little over 15,000 units up-till now. Used cars are coming into the country as usual after the government failed to implement the policy to curb them.
But clearly, there is plenty of demand for local cars as well. Pakistani Suzuki (PSX: PSMC) is on a roll with phenomenal sales numbers across all its variants. Cultus (34%) and Wagon-R (75%) are leading, with Mehran (27%) not far behind. In February, the company stopped taking orders for Wagon-R until it introduced the facelift at a higher price tag the next month. Since last fiscal year, Suzuki has seen its market share grow to 56 percent from 54 percent. Suzuki has a unique space in the market and even the competition it gets from used imported cars isn’t enough to put a dent to its sales. Perhaps, this led to the confident price hike.
Talking of unique spaces, City and Civic by Honda Atlas Cars (PSX: HCAR) also have a certain level of brand loyalty — customers continue to choose these variants against high-engine imported variety. Since it launched the new crossover SUV, Honda’s market share has grown to 20 percent from 17 percent as compared to the same period of last year. Though it would be remiss not to mention that Honda has been seeing a higher growth since it launched new model of its civic. The SUV, Honda BR-V launched just last year has sold more than 6000 units in the eight months to the fiscal year.
On the higher end of the SUV segment is Indus Motors’ (PSX: INDU) Fortuner that too has sold 4 times more units during 8MFY18 compared to last year. The company is currently working on improving efficiency of its plants which may have led to a decline in Corolla sales. Meanwhile, it cancelled thousands of bookings made by investors that were selling the cars back into the market on premiums, otherwise called “own-money”. It is unlikely INDU would suffer from this move since appetite for Corolla in the market remains consistently strong. Indus Motors’ Hilux after the upgrade has also been slowly carving its share in the market.
The growth in the industry is not overwhelming, but there isn’t a segment that has underperformed so far. In fact, consumers are willing to buy cars even at higher price tags — surely cars being sold on “own-money” points towards said willingness. Their appetite for SUVs like BR-V and Fortuner is an indicator that they are ready for more variety. Clearly, demand is enough to absorb all the capacity and then some. It’s a good thing so many new car ventures are preparing to set foot into the market.
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