Indus Motors to increase car prices to pass cost impact

Indus Motors to increase car prices to pass cost impact

KARACHI: Indus Motors, the maker of Toyota cars in Pakistan, is likely to increase prices to pass on the cost impact to consumers.

The company management said in corporate briefing session on Tuesday.

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Regarding car prices, management informed that company has to increase price to pass cost impact to consumers as current car prices are not sustainable at exchange rate of over Rs230. They highlighted, current car prices are set at dollar rate of around Rs210-215, according to analysts at Topline Securities.

The company conducted the briefing to discuss its FY22 financial results and company outlook.

Company expect at-least 40 per cent decline in volumetric sales in FY23 amid higher car prices, hike in interest rates, strict auto financing rules, recent floods and restriction on Completely CKD imports.

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To note, INDU is currently running at production capacity of around 40 per cent-45 per cent, the analysts added.

To note, at the current production level i.e. 40-45 per cent, INDU’s order book is filled for next 4 months. 

Pakistan car sales increased by 51 per cent YoY to 379,350 units in FY22 out of which INDU car sales clocked in at 75,611 units, up 31 per cent YoY. Used car imports clocked in at 28,122 units in FY22, up from 21,239 units in FY21.

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Management stated that higher FED and Sales Tax from Jan-2022 along with 1 per cent CVT on 1300cc+ from Jul-2022 and increase in Advance Income Tax has also led to higher vehicle prices.

With regards to recently announced refund policy, management informed that around 800-1,000 clients cancelled their booking and got their cash back along with interest amount. 

Investment plan of US$100 million for local production of HEV vehicles is on track; where company is expected to launch its variant next year in 2023.

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Net sales in FY22 increased by 54 per cent to Rs276 billion from Rs179 billion in FY21 while profit after tax only increased by 23 per cent YoY to Rs15.8 billion from Rs12.8 billion due to rupee devaluation against US dollar and imposition of super tax.

Gross margins declined to 6.7 per cent in FY22 from 9.3 per cent in FY21 primarily on account of rupee devaluation against US dollar, increased freight charges and higher commodity prices.

To note, these are lowest margins in last 10-Years. Management highlighted that gross margins will remain depressed in FY23.

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