Volume of car sales in Pakistan for February 2023 may drop to 4.4 units, down by 53 per cent month on month (MoM), hitting 14-year low, said analysts at JS Global on Thursday.
“We preview auto sales volume for February 2023 where we foresee sales to drop to 4.4k units, down 53 per cent MoM, hitting its 14-year low over (barring COVID-19) reduced operating days for Indus Motors and Pak Suzuki Motors and restricted demand in the sector.”
The analysts further said that with limited foreign exchange reserves and administrative controls to curb imports still in place, volume for the automakers are expected to remain at low levels taking view of production issues, price hikes, tax changes and interest rate hikes. “We expect cumulative volume decline during fiscal year 2022-2023 to clock at more than 50 per cent year on year (YoY) extending into first half of fiscal year 2023-2024.”
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Explaining the sales, they said auto sales volume for February 2023 where we foresee sales to drop to 4.4k units, down 53 per cent MoM.
Monthly volumes have now hit their 14 year low where the last time we saw similar volumes was in December 2008 (barring Covid).
The decline comes on the back of lower operating days for INDU and PSMC amid limited raw material availability and subdued demand with deteriorating purchasing power of customers. Sales growth during first eight months of fiscal year 2022-2023 remained in the negative territory with volumes of 91.3k units, down 46 per cent YoY.
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Sales for HCAR are expected to witness a relatively lower decline compared to its peers sequentially as the company’s plant remained operational in January 2023 and February 2023 both.
Ailing demand in the sector and import curbs, however, resulted in a 41 per cent MoM decline. Sales for INDU and PSMC are expected to drop 50 per cent/67 per cent MoM respectively, for the same reason compounded by plant closures.
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To recall, plant for INDU remained closed for 14 days in February 2023 against no closures in January 2023 whereas PSMC’s plant remained closed for 8 days in February 2023 as against 18 days in January 2023.
The analysts said that with limited forex reserves and administrative controls to curb imports still in place, volumes for the automakers are expected to remain at low levels pressed by both supply and demand side impediments.
With demand staggered for the OEMs, a ripple effect can be seen in the local Auto Parts industry as well with manufacturers such as Agriauto Industries Ltd (AGIL) opting for plant closures as well.
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Even once import controls are relaxed, automakers will continue a bumpy ride with sky high prices driven by sharp PKR devaluation and higher interest rates.
For perspective, automakers have increased prices 3-4 times in The current year to date by up to 29 per cent in response to sharp PKR devaluation against the US$ by 12 per cent during the same period and increase in GST from 17 per cent to 18 per cent as announced in the Mini Budget.
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Additionally, the State Bank of Pakistan (SBP) in its last Monetary Policy Meeting (MPC) meeting further hiked interest rate by 300 basis points to 20 per cent squeezing demand for auto financing.
