Car sales surge by 58% YoY

Interest rate drop sparks hope, but high prices, new taxes cast shadow

KARACHI:

Passenger car sales in Pakistan surged by 58.2% to 5,857 units in the first month of the fiscal year, compared to sales in July 2023, driven by a decrease in the interest rate. However, despite this uptick, the overall outlook remains challenging, according to data from the Pakistan Automotive Manufacturers Association (PAMA).

The PAMA report also revealed a 52.1% increase in truck sales to 251 units and an 86.7% rise in bus sales to 56 units. Sales of Jeeps and pickups soared by 96.7%, reaching 2,732 units. Additionally, sales of two and three-wheelers, including motorbikes and rickshaws, climbed by 15.5% to 84,993 units.

Conversely, tractor sales plummeted by 45.5% to 1,460 units during the same period, a worrying sign for the agricultural sector.

Auto sector analyst Mashood Khan cautioned that the report is not entirely positive, as the struggling auto industry continues to face significant challenges, particularly due to an unfavourable industrial policy.

"The decrease in the interest rate is a positive development and may yield better results by the end of this year or in January 2025," Khan noted. However, he expressed concerns about the farm tractor industry, which is already feeling the impact of new taxes introduced in the federal budget.

Khan also highlighted that high auto prices, driven by new taxes, have made cars unaffordable for many consumers, particularly those in the salaried class. "Car sales are unlikely to see substantial growth in the coming months, especially with predictions of a rising US dollar rate, which could increase import pressures," he added.

The motorcycle industry has shown signs of recovery, but sustained growth remains uncertain. Khan stressed the importance of a robust industrial policy to drive economic growth, particularly through infrastructure development.

Reflecting on past successes, Khan noted that car sales volumes have significantly declined from the peak of 12,000 to 15,000 units in 2022, to just under 6,000 units currently. He stressed that growth in sectors like textiles, food, and agriculture is crucial for the auto industry, as increased consumer spending power would drive vehicle purchases.