As predicted by this column, passenger cars are now recording negative and zero percent growth. However, cumulatively they are staying unchanged from last year, falling by only one percent. Interestingly, if the now discontinued Mehran sales were taken out of the equation, cumulative car sales have grown by 6 percent in 9MFY19 year on year. Evidently, the loser here is the elite car maker Honda with a 47 percent drop in BR-V sales and no growth in its City/Civic. Toyota continues to surprise the market.
Suzuki gives mixed feelings. The company has timed the introduction of its Alto-660cc well. As its most sold car Mehran dwindles down to a stop, the company needs another big seller. But it seems it need not worry too much as both Cultus and Wagon-R are still selling like it’s an expanding economy, despite an average 20 percent price increase in just the past 15 months, and the substantial increase in cost of financing (read more: “How much is Rs10,000 worth?” Mar 28, 2019).
Other happy “co-incidences” for the company include the government reinstating non-filers to purchase vehicles of any size. It is estimated that most Suzuki buyers are non-filers. Moreover, the government also shut down the import of used cars by imposing restrictions on dollar duties to come from abroad, rather than locally. That is the perfect non-tariff barrier if there ever was one. As a mid-range car assembler, Suzuki faced the most competition from used-car imports which are usually in the small car category.
Toyota’s Corolla is on a strong growth path as well even though it has raised prices at least five times in the past year or so, prices up 21 percent and above. Honda’s zero percent growth should have been negative, given its Civic prices went up by 32 percent and City by 22 percent for its basic models. It would be interesting to see the customer breakdown for Honda and examine who is purchasing these car that cost between Rs2.5 to Rs3.5 million? Is the demand coming from institutions and corporate sector, or consumers? The car financing numbers indicate credit is significantly down. Does this mean, Honda buyers have upward of Rs3.5 million just lying around ready for use? This is an economy to keep savings close to the chest. One argument is that the 9M numbers are reflecting those car buyers who have been racing to the dealerships to book cars of their choice before the impending price increases and avoid the incremental cost.
Nevertheless, with another three months into the fiscal year finish line, and the current movement of sales, it seems the sector will end on a flat note. Any sales drop will not be as dramatic as first imagined though. Car buyers, it seems, are made of thicker skins (and wallets).
Comments
Comments are closed.