Auto sector posts lowest sales since Covid

PAMA reports car sales of only 4,500 units, down 52% MoM and 80% YoY

KARACHI:

Pakistan’s automotive industry has suffered yet another setback as the country recorded its lowest monthly car sales in April 2023 since the Covid lockdown. With the ongoing economic meltdown, the decline has been attributed to a combination of seasonal slowdown during the month of Ramazan, lower working days due to Eid holidays, and non-availability of Completely Knocked Down (CKD) parts owing to Letters of Credit (LCs) issues.

According to Topline Research Auto Analyst Sunny Kumar, “Pakistan has recorded the lowest monthly car sales in April-2023 since the Covid-19 lockdown.”

Pakistan Automotive Manufacturers Association (PAMA) reported car sales of only 4,500 units, down 52% month-on-month (MoM) and 80% year-on-year (YoY). This marks the lowest monthly sales since May 2020 during the Covid-19 lockdown. Including non-PAMA members’ car sales, it clocked in at around 5,500, down 47% MoM.

“The MoM decline is primarily due to a seasonal slowdown witnessed in Ramazan, shorter working days amid Eid holidays, and the non-availability of CKD parts due to LC issues,” said Kumar, adding that this takes the ten months of FY2023 sales to 114,868 units, down 50% YoY, primarily attributable to the non-availability of CKDs, escalating car prices, expensive auto financing, and the low purchasing power of consumers.

“Sales volumes decreased significantly across all segments, with the passenger car segment showing the largest decline,” said Maaz Azam, auto analyst at Optimus Capital Management. The primary reason for this sharp decline is due to depleted demand and order book, rather than import restrictions, as inventory levels increased despite non-production days (NPDs) being observed by auto players. The only segments that remained stable were tractors and two-wheelers, with a MoM change of 8% and -2%, respectively, he said.

Honda Atlas Car (HCAR) has recorded the highest decline of 75% MoM to 207 units in April 2023, led by a decline in sales of the City and Civic by 74% MoM. Similarly, Pak Suzuki (PSMC) also posted a decline of 74% MoM to 1,474 units primarily due to the reasons mentioned above. Hyundai sales were also down 13% MoM, where the Elantra was down 37% MoM to 119 units and Tuscon down 17% MoM to 315 units in April 2023. However, Indus Motors recorded an increase of 2% MoM to 1,948 units in April 2023 due to the availability of CKD parts.

Amongst tractors, Millat Tractors (MTL) recorded a decline of 55% MoM to 1,206 units in April 2023, while Al Ghazi Tractors (AGTL) recorded a six-fold jump in its sales to 2,005 units in April 2023. This takes the total tractor industry sales to 24,444 units in ten months of FY2023, down 47% YoY due to the floods, plant shutdown, lower consumer buying power, and higher prices.

akistan bike sales were down 3% MoM and 46% YoY in April 2023. Atlas Honda (ATLH) recorded sales of 73,500 units, up 2% MoM while down 36% YoY. Trucks and buses sales were down 51% MoM and 68% YoY to 152 units in April 2023. This takes sales for the first ten months of FY 2023 to 3,534 units down 35% YoY primarily due to a drop in transportation activity and a slowdown in the economy.

The current situation in the auto industry is worrisome, and the stakeholders are looking for ways to address the issues. The non-availability of CKD parts due to LC issues is a significant concern that needs to be resolved. The escalating car prices and expensive auto financing have also contributed to the decline in sales, and the low purchasing power of consumers is another factor.

“The automobile industry will remain under pressure amidst a challenging business environment, skyrocketing inflation and higher financing rates – all of which are further exacerbated by the shortage of CKD kits,” said Asad Ali, Auto Sector Analyst at Insight Securities.

Published in The Express Tribune, May 12^th, 2023.

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