Auto sales fall for second straight month on tax-related curbs

Analyst also cites hike in vehicle prices, higher interest rate as reasons behind slowdown

KARACHI: Locally assembled auto sales dropped for the second consecutive month in June, this time too by 15% month-on-month, according to data released by the Pakistan Automotive Manufacturers Association, as restrictions on non-filers of income tax returns came into effect.

Sales of passenger cars, light commercial vehicles and jeeps has been on a downhill path as non-filers of tax returns, who have roughly been half of the total car buyers, have been barred from purchasing new cars with effect from July 1.

All auto manufacturers had stopped the booking of cars by these people in May since the companies take at least three months to deliver a vehicle. However, they record sales soon after booking a car.

The number of units sold in June dropped 15% to 18,518 units compared to the 21,813 units sold in May.



“The issue of non-filers has been the main reason for the drop in sales. Moreover, Eid holidays in June also impacted the sales,” Farheen Irfan, Research Analyst at Elixir Securities, told The Express Tribune.

However, she added that the increase in car prices by the auto manufacturers did not have any impact on sales because there was no substitution option since imported used car prices had also gone up due to depreciation of the rupee against the US dollar.

“If a person has to buy a car, then he or she will do so, notwithstanding the increase in prices,” Farheen said.



However, according to a report of Taurus Securities, the drop in auto sales has come in the wake of a recent price hike and a gradual increase in auto-financing rates. The State Bank had raised the benchmark interest rate by 50 basis points in May.

Toyota, which is said to have a big chunk of rural customers, who are mainly non-filers of tax returns, endured the biggest drop of 23% in sales from 5,910 units to 4,548 units. Sales of Honda vehicles dipped 15% from 4,252 to 3,626 units. Suzuki sales fell 11% from 11,651 to 10,344 units.

However, the industry posted a 20% increase in sales on a year-on-year basis.

Published in The Express Tribune, July 12^th, 2018.

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