Against expectations, car sales surge in December 2021

Vehicle bookings prior to mini-budget approval drive increase in sales

KARACHI:

Contrary to the usual trend in every December when automobile sales drop due to the seasonality factor, car bookings in December 2021 recorded a sharp growth of 96% to 27,331 units compared to the same period of previous year.

“Normally, automobile sales decline at the end of each year but this time around the scenario is different,” said Arif Habib Limited (AHL) analyst Arsalan Hanif while talking to The Express Tribune on Tuesday.

On the one hand, vehicle manufacturers increased car prices but on the other, consumers booked cars in anticipation of a hike in prices following the approval of mini-budget and that created a balance in the market, he said.

He cherished that sales growth came despite shortage of semi-conductors, disruption in the international supply chain and suspension of booking of certain models by the automakers.

Pent-up demand coupled with expectation of an increase in car prices, after approval of the mini-budget, contributed to the phenomenal growth in the automobile sector last month, remarked AL Habib Capital analyst Sunny Kumar.

The improvement in supply chain also drove the increase in car sales, he noted.

Despite the interest rate hike from 7% in July 2021 to 9.75% in December 2021, the auto financing in Pakistan continued to rise and soared to an all-time high of Rs349 billion in November 2021, said Kumar.

“Due to the seasonality factor, auto sales generally fall in December every year,” said Insight Securities analyst Ali Asif. “However, in the past month, the primary contribution to the uptick in automobile sales came from Pak Suzuki Motor Company.

He pointed out that the company overcame the problem of chip shortage, resulting in higher overall car sales in Pakistan.

The robust growth was led by the tax relief announced in the budget for 2021-22, said Kumar.

Launch of new models and a recovery in the overall economic activity also played a vital role in propping up the vehicle bookings.

Citing that sales increased due to a reduction in federal excise duty and sales tax, favourable interest rates, conducive economic environment and the launch of new models, he expected car bookings to fall in future on the back of monetary policy tightening and fiscal adjustment.

Moreover, the recent price rise and a twofold increase in federal excise duty will discourage people from buying new models.

Published in The Express Tribune, January 12^th, 2022.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.