According to the Pakistan Automotive Manufacturers Association (PAMA), Pakistan’s auto sales registered growth month-on-month (MoM) during December 2018 for the first time in the previous 12-year. Car sales were increased by 11 percent on MoM basis. This is the first time since December 2005 that auto sales increased during December on MoM basis. The experts also recorded that 2018 has been an eventful, but tough, year for auto sector in Pakistan as key developments on the macroeconomic front proved to be hard-hitting for this sector.
Statistics showed that the rupee posted massive depreciation against the US dollar, which then led to the existing car manufacturers growing their prices on various occasions to pass the impact of raised cost on to the consumers. It is also registered that during the budget for FY2019, the Government of Pakistan placed a ban on purchase of automobiles by non-filers, in an effort to encourage citizens to file their income tax returns. Whether this initiative succeeded in attaining its target is a different matter, the move, however, elicited an adverse reaction from the industry. Statistics also showed that on a year-on-year (YoY) basis, the sales inched upwards by 1.0 percent to 19,423 units during December 2018 as opposed to 17 percent YoY fall during November 2018. This brings the sales number for the first half of financial year 2019 to 120,066 units, down 3.0 percent as against to the same period of last year. This also marks the first time in 5-year where sales fell during the first half of a fiscal year.
Different sources also recorded that 2018 was a trying year for Indus Motors, Pak Suzuki and Honda Atlas, as company profits suffered owing to various developments in the economy. Indus Motor Company, which assembles and manufactures Toyota cars in the country, had to stop taking orders due to the sharp depreciation, which made import of auto parts expensive and raised the cost of production. In terms of earnings, profit registered by the company posted a fall of 3.0 percent in the quarter closed September 2018 as against to the previous year.
However, the company had posted a surge of 19 percent for the corresponding period during 2017. With the competition growing in the sector, Indus Motor also proclaimed to import completely built units of Toyota Rush in a bid to capture the price segment between its Corolla and Fortuner vehicles. Apart from this, the company also looked to boost its performance as the board approved an investment of Rs3.3 billion to increase its annual production capacity.
Meanwhile, Pak Suzuki also faced some grave competition as United Motors ventured into the passenger car market, tapping the low-priced segment of the society, which has mainly been catered to by Suzuki Mehran. Additionally, profits reported by Pak Suzuki plunged by a huge 55 percent in the January to September period, while the share price of the company declined 62 percent during the year. However, on the occasion of attaining milestone of manufacturing 2.0 million vehicles, the company also proclaimed an investment of $460 million in a brand new plant.
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During the last year, Honda Atlas increased its car prices 4-time, while Indus Motor and Pak Suzuki increased their prices four and five times, respectively. The three auto manufacturers are also predicted to raise prices in January. Statistics also showed that because of higher sales of Pak Suzuki Motor Company, up 38 percent MoM. However, on the other hand YoY sales were up 2 percent from 11,448 units in December 2017 to 11,732 units in December 2018. Higher sales were led by 32 percent YoY and 13 percent YoY rise in Cultus and Ravi sales, respectively.
Indus Motors posted sufficient YoY growth of 16 percent owing to robust 84 percent and 10percent YoY rise in Hilux and Corolla models, respectively. However, sales of Fortuner fell by 33 percent. Honda Atlas sales declined by 26 percent YoY from 3,213 units in December 2017 to 2,367 units in December 2018. The experts also mentioned that the decline in YoY sales for December 2018 was led by 50 percent lower BR-V sales and 19 percent lower sales of City and Civic variants on YoY basis and it is expected to recover monthly sales slightly in January 2019.
New entrants
Statistics recorded that after a hiatus of 7-year, the Shehzore truck was launched in February last year, marking the first project to resume production under the Brownfield status. Following the launch, officials of SsangYong Motor Company– a South Korean SUV manufacturer – also met with the management of Daehan Dewan Motor Company to discuss plans to launch SUVs in this year. Furthermore, Ghandhara Nissan also geared up to make strides in the sector, as it proclaimed to start production of Datsun vehicles in the country. According to officials the company would spend Rs 4.5 billion over the first 4-year. The company also introduced its locally-assembled JAC Motors X200 one-ton pickup and inked an importer’s contract with France’s Renault Trucks SAS. It is also said that in a notification, it proclaimed that it has imported a few units to conduct a trial of the vehicle in the country, a move meant to test the market and the product’s demand.
Renault, which expressed its intent to venture into Pakistani market previous year, acquired an industrial plot for setting up an automotive plant. The project, which has been commenced in partnership with Al-Futtaim Group, has acquired 54 acres of land in the Faisalabad Industrial Estate Development and Management Company (FIEDMC), will invest $140 million. The French carmaker will start vehicle production during 2020.
Hyundai, which is also setting up a plant in Faisalabad, is also set to roll out locally-assembled Hyundai cars in March 2020. On the other hand, South Korean car manufacture Kia has already introduced 2 new vehicles– Grand Carnival 11-seater family passenger car and a one-tonne pickup – in the form of completely built units.