Selling cars in a damp economic climate may be a difficult business. But local automakers seem to be faring relatively well. The industry managed to increase its sales by 8 percent year-on-year in the first five months of current fiscal year, albeit partly due to the low-base affect which will soon be diluting in the months to come as auto sales had hit the bottom in November 2008, due to price hikes, inflationary pressures, and lower bank financing.
Thanks to a favorable steel outlook and some smart business decisions, however, the industry isn likely to witness a bumpy right ahead.
As the U.S dollar gradually finds its feet, investment in commodities is losing heat, with the price of oil and gold seen easing in the quarters to come. Steel, a major cost component of auto industry, will likely follow the trend with a lag, especially considering the potential construction slowdown in the U.A.E.
Even if prices rebound, Pakistani auto manufacturers have shielded themselves against steel price hike by maintaining the inventory for the next six to eight months.
Many of them also have the room to find cushion against weakening value of rupee that fell 8 percent and 20 percent versus USD and Yen respectively since July last. The leading automakers have the capacity to mitigate the losses by pricing their CKD purchases in US Dollar as it has a greater pricing power compared to Yen.
Even for low-end producers, things are likely to get better. While the overall sales of 800cc segment remained relatively flat - falling by 1 percent against the same period last year, a closer look at data shows that sales of segment leader Suzuki Mehran registered a significant increase of 21 percent that offset the 48 percent decline in Daihatsu Cuore.
Things are also getting better for the high-end cars - 1300cc and above engine capacity - which posted a growth of 62 percent against last year. Except for Honda Civic, all other car models showed a significant rise in sales, where sales of Toyota Corolla were up 105 percent, Suzukis Liana were higher by 19 percent, while that of Honda City rose by 3 percent in Jul-Nov year-on-year.
Talking about segments, there is one interesting development in the pipeline: the launch of 1300cc Swift sedan by Suzuki, which can potentially bring about a new revolution in the countrys passenger car segment.
Although, the consumers of other high end car makers, Toyota and Honda, are loyal to their brand, Swift might eventually invite attention considering that broader economic environment is still struggling. Perhaps thats why many other players in the industry are also chalking out their plans to launch their cars in this segment over the next few years.
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AUTO SALES DURING 5MFY10
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Sales units 9-Nov MoM 5MFY10 YoY
change change
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Industry car 8,575 -23% 46,497 18%
LCV+pickup 1,389 18% 6,541 -34%
Total 9,964 -19% 53,038 8%
PSMC 5,410 -17% 28,339 -7%
INDU 3,568 -20% 18,478 55%
HCAR 754 -31% 5,104 -1%
DFML 135 -15% 689 -30%
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Market share
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PSMC 54% 1% 53% -9%
INDU 36% -1% 35% 11%
HCAR 9% -1% 11% -2%
DFML 1% 0% 1% -1%
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Source: PAMA
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