Car sales down 4 percent on economic slowdown, high prices

KARACHI: The sales of locally assembled cars have declined by 4 percent during first nine months (July-March) 2018/2019 owing to slowdown in economy and recent rise in car prices, analysts said on Wednesday.

The sales of locally assembled cars fell to 185,023 units during July – March 2018/2019 as compared with 192,734 units in the corresponding period of the last fiscal year, according to Pakistan Auto Manufacturers Association (PAMA).

Analysts at Topline Securities attributed the decline in car sales to slowdown in economy and rise in recent car prices.

Indus Motors (INDU) reported 11 percent YoY decline during March 2019 mainly on account of lower sales of Fortuner & Hilux, which were down 63 percent and 65 percent, respectively, YoY.

The analysts said that this was due to 10 percent Federal Excise Duty (FED) imposed on above 1700 CC engine cars.

Corolla sales posted growth of 2 percent YoY.

Pak Suzuki (PSMC) reported 23 percent YoY growth in sales led by growth in Wagon R with growth of 63 percent YoY.

Other major contributors in overall growth were Cultus, Bolan and Ravi, up by 17 percent, 38 percent and 36 percent YoY, respectively.

Swift was the only PSMC variant to record decline, down 16 percent YoY.

Honda cars (HCAR) sales fell 29 percent YoY in Mar 2019, steepest YoY decline during a month since May 2012. In addition to economic factors, decline in City and Civic variants is attributed to anticipation of a launch of new variant (Civic 1.5 Turbo new variant launched in April-19).

The analysts said that overall demand of automobiles is expected to remain subdued due to recent hike in policy rate (+475bps since Jan 2018 to 10.75 percent), resulting in higher borrowing cost for auto financing.

Furthermore, incremental cost as a result of rupee devaluation & increasing inflation has led to higher car prices, impacting purchasing power of car buyers.

To note, the government is mulling over removal of 10 percent FED on engines with 1700CC above, as per news reports.

However no official announcement has yet been made, adding to the uncertainty to the car sales with engine size of over 1700CC.

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