In April: Car sales decline 24% to 19,437 units

Fall comes due to interest rate hike, rupee depreciation

KARACHI: Sales of cars and light commercial vehicles plunged 24% to 19,437 units in April 2019 compared to 25,567 units in the same month of previous year, according to data released by the Pakistan Automotive Manufacturers Association (PAMA).

During March 2019, this segment had recorded sales of 22,878 units. Therefore, on a month-on-month basis, this segment recorded a decrease of 15%.

Cumulatively, in first 10 months of the current fiscal year, the sales of cars and light commercial vehicles shrank 6% to 204,883 units against 218,301 units in the corresponding period of previous year.

Sales of Pak Suzuki Motor Company fell from 14,781 units in April 2018 to 10,789 units in April 2019, down 27%.

Indus Motor Company (Toyota) witnessed a relatively lower decline of 7% as its sales contracted from 6,183 units to 5,738. On the other hand, Honda Atlas endured the biggest hit of 38% in sales which plummeted from 4,603 units in April 2018 to 2,836 units in April 2019.



“Pak Suzuki and Honda bore the brunt of increased interest rate,” said JS Research analyst Ahmed Lakhani.

“Customers of these two companies reside in urban areas where people prefer lease to buy a vehicle and the hike in interest rate discouraged them from making purchases which, in turn, caused the decline in sales of these companies.”

On the other hand, the customers of Indus Motor are mostly landlords who reside in rural areas and pay in cash, hence they were not affected by the hike in interest rate, he said.

Apart from this, a 10% federal excise duty imposed on cars of 1800cc and above engine capacity impacted Honda’s sales, said the analyst.

He was of the view that Pak Suzuki’s shift from Mehran to Alto 660cc also contributed to the fall in sales because the company had not yet released Alto 660cc in the market to fill in the gap created by the absence of Mehran.

“Overall, the rupee devaluation played a major role in the decline in car sales,” said Lakhani. Every company increased prices in the range of 15-20% to pass the impact of rupee devaluation on to customers.

Cars, which were earlier priced at Rs2 million, are now available in the market for Rs2.4 million.

“This massive increase in prices has damaged the purchasing power of customers,” he said. “Although the government withdrew the ban on non-filers of tax returns, it hiked advance tax on the non-filers, which contributed substantially to this situation.”

Sales of trucks and buses declined 52%, from 983 units in April 2018 to 472 units in April 2019. Tractor sales fell 32% from 7,979 units in April 2018 to 5,430 units in April 2019.

Sales of bikes and three-wheelers declined 12% to 155,215 units during the month under review against 176,931 units in the corresponding period of previous year. “Looking at this situation, new entrants may delay their entry into Pakistan’s market,” he said. “The government has finalised an IMF deal but details will come after two months, which will clear the situation of the market.”

Published in The Express Tribune, May 14^th, 2019.

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