Auto industry becomes attractive again

Ban on new car purchase by non-filers of tax returns has been lifted

KARACHI: Almost all stocks in the automobile sector shined at the Pakistan Stock Exchange on Tuesday because of Finance Minister Asad Umar, who presented a revised finance bill lifting the ban on purchase of new cars by non-filers of tax returns.

Stocks of major auto industry players, Honda Atlas Cars and Pak Suzuki Motor Company, hit their upper price ceilings with a 5% increase in value while Toyota’s stock fell by 0.55%.

According to JS Research analyst Ahmed Lakhani, Toyota managed to keep its car sales intact, but Suzuki and Honda suffered a decline in the first two months of fiscal year 2018-19 after the restriction came into effect.



He said Toyota entertained non-filers before July 1, when the ban became effective, on a priority basis as compared to the filers.

Despite that, some demand still remained unsatisfied for Toyota cars. However, other companies were not able to maintain their sales and recorded a decline in revenues due to the ban. “Toyota must also have felt the heat of the ban just like its peers, but since the ban has now been removed, things will start moving just as before for every company,” Lakhani added.



The auto industry reported a 6% decline in sales in the first two months of FY19 for the first time since financial year 2015.

Pak Suzuki sales declined by 12% while Honda reported a drop of 3%. Toyota managed an overall increase of 3% during July and August.  Elixir Securities’ research analyst Farheen Irfan said the three important factors impacting industry sales negatively had now been reduced to two with the lifting of the ban on non-filers.

“The auto industry had been struggling as three factors namely increasing prices due to rupee depreciation, increasing policy rate, which has been making car financing less enticing for the buyers and ban on non-tax filers were affecting sales. But now the lifting of the ban has made the industry attractive again,” she said.



Meanwhile, the finance minister also announced while presenting the revised finance bill that the federal excise duty on luxury cars of 1,800cc engine capacity or above had been doubled from 10% to 20%.

An industry source said the higher duty would only be applicable to imported vehicles. According to analysts, if the higher duty of 20% is applicable to imported cars only, then it would help the manufacturers increase sales of locally-assembled vehicles.

Published in The Express Tribune, September 19^th, 2018.

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