The car segment within the automotive industry is having a decent run. In 9MFY18, the segment grew by 22 percent year on year. Local sales for cars and jeeps could reach 230,000 units by year end at the present rate. Data reported by Pakistan Automotive Manufacturers’ Association (PAMA) shows locally assembled passenger car, jeeps, commercial vehicles and tractors grew by 24 percent in the period with the highest growth witnessed in small-engine cars, trucks and tractors. In fact, the only sector that is surprisingly underperforming is the bus segment while among the three car makers; Toyota continues to see a negative growth in Corolla sales.
Market leader Pakistani Suzuki (PSX: PSMC) is keeping busy and has not seen a dull day since this fiscal year kicked off. The biggest sell lately is Wagon-R growing by 65 percent, Cultus (31%), Mehran (24%) and Swift (10%). Even though Suzuki gets competition from used cars given the relatively affordable and small car segment it operates in, its marketability and reach makes it a unique player with only a market share that continues to grow.
Suzuki Ravi that has competition from Hyundai Shezore as well as FAW carrier both of which have recently picked up market share grew by 16 percent. Completely Built Unit (CBU) imports of motor cars, according to Pakistan Bureau of Statistics (PBS) grew by 32 percent in the July-Feb 18 period that shows that imported cars like Suzuki Vitara or Ciaz must be selling more even though official numbers are not available.
Honda Atlas Cars (PSX: HCAR) has also seen its market share improve not only because of the City/Civic variants but also because of the introduction of locally assembled Honda Br-V. This subcompact crossover SUV was launched last year. Consumers with families may find it attractive given that it doesn’t cost as much an SUV but still has interesting SUV features. The company sold nearly 7000 units of Br-V in 9MFY18.
Indus Motors (PSX: INDU) has been in the news as it has cancelled thousands of bookings of investors that have been buying in bulk to sell on what is called “own money”. This doesn’t impact demand as such for Corolla. The company also went through a debottlenecking at its plant which would also increase capacity a little bit. The SUV Fortuner and the new Hilux-Revo are writing the real success story for Indus Motors where Hilux sales grew by 28 percent and Fortuner sales tripled in 9MFY18.
Between Jan-18 and Mar-18, the automakers have raised car prices consecutively by 2- 9 percent due to the rupee devaluation against dollar as well as yen. Since the imported content is so high in manufacturing, price increases were inevitable (Read: “Cars: Creating chaos”, April, 2, 2018). Any impact of raised prices on sales would start reflecting from April-18. Meanwhile, Suzuki’s price increases were nominal lying between Rs20,000-30,000 for different variants except for Wagon-R that saw a Rs70,000 hike after the company added some cosmetic upgrades.
However, the price bump is unlikely to warrant any significant downturn in demand. The fact that customers today are already buying on premium for both Toyota and Honda cars, the willingness is there even at higher rates. While the appetite for small engine cars, coupled with the increase in price for used import cars will continue to drive Suzuki sales despite increased prices.
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