Only a few days after Indus Motors announced that it would be shutting down its plant for 10 days in Sep, Honda Atlas followed suit. The two companies have barely manufactured these past three months since July having observed several non-production days each month. Numbers have only dwindled. Demand has the two automakers beat, while Suzuki may not be doing too well either, though Alto bookings are keeping the automaker busy. Just about.
All combined, passenger cars and jeep sales have dropped 40 percent in the first quarter of FY20, with the biggest declines witnessed in Honda and Toyota vehicles including in the SUV and crossover segments Toyota Fortuner and Honda BR-V. In fact, this quarter has registered the lowest volumes for assembled vehicles sales since FY14.
It would be safe to assume that imported vehicles are also witnessing similar demand in the market. Pakistan Bureau of Statistics (PBS) import data for the period of Jul-Aug shows that completely built unit (CBU) imports fell by 81 percent year on year. For motorcars, it is a whopping 85 percent! Needless to say, rupee depreciation and government duties on luxury products (vehicles in this case) have hit the market where it hurts.
Meanwhile, the persistent price hikes by automakers finally became too much for consumers across income groups—even though for the better part of last fiscal year when demand for commercial vehicles was already crashing, passenger cars retained their volumes to a great extent. But other factors piled on. Higher government taxes, higher cost of borrowing due to monetary policy tightening, reduced purchasing power all brought demand to a standstill. Research shows that though the Pakistani car appetite is not very sensitive to changes in prices (up till a point), it tends to be significantly sensitive to changes in incomes. Economic austerity is hurting all levels of income groups.
Middle-income car buyers are also taking a step back given significant decline in fan favorite Suzuki Wagon-R and Cultus. Now that Mehran has been phased out, Suzuki is pushing its Alto to the market, and so far it has worked. It has also saved Suzuki from plant shut downs but with recent price hikes in the new variants as well, it is anybody’s guess how long the automaker can hold consumers’ excitement. In this economy, it can’t for too long.
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