Car sales may drop to a seven-month low

Analysts predict a drop in car sales after discussion with the automobile industry.

KARACHI: Car sales could drop to a seven-month low during July 2010 with unit sales falling by 39 per cent, according to analysts and their discussions with the automobile industry.

This is mainly because dealers bought a large number of cars in June 2010 as they were anticipating a one per cent increase in sales tax in the budget announcement.

According to Topline Securities, Pak Suzuki Motor Corporation’s sales will show a drop of 52 per cent in July as compared to the previous month, while the decline in sales of Indus Motor Company for the same period will be 27 per cent.

However, July 2010 car sales will be flat when compared to July 2009, said Topline Securities analyst, Furqan Punjani. He expects car sales to reach 154,000 units in the fiscal year 2011, a nominal growth of 10 per cent after the surge in buying in the fiscal year 2010.

Pak Suzuki & Indus Motor’s sales might fall by 25-50%

Pak Suzuki is likely to take a battering as its sales are expected to decline by 52 per cent to around 4,500 units in July compared to 8,693 units in June. This decline is likely to be visible in sales of its Mehran model.

Similarly, sales of Indus Motor automobiles are expected to remain around 4,200 units compared to 5,793 units in June 2010, down 27 per cent. Furthermore, the company’s Honda Car sales are also expected to fall by around 33 per cent.

Buying before the budget

Going forward, it is expected that car sales will normalise. Overall automobile sales may reach 152,000 units with average monthly sales expected to be around 12,600 units. In the last fiscal year 2010, average monthly car sales stood at 11,500 units.

Pak Suzuki will probably post the highest sales growth of 11 per cent to 80,000 units as compared to 72,000 units last year. However, sales of Indus Motor are likely to remain flat at 51,000 units as the company has already achieved its 100 per cent capacity utilisation.

Interest rate hike

Indus Motor and Pak Suzuki are highly leveraged and currently a very minor portion of sales is derived from consumer financing. However, if interest rate continues to increase, it will affect car demand.

Published in The Express Tribune, August 4^th, 2010.