New fiscal year brings no good news for auto sector as sales plummet

Data from PAMA shows sales of locally assembled cars dip 23% in July.

KARACHI: The first month of the fiscal year 2013-14 brought bad news for the local auto industry as car sales declined by a significant 23% in July 2013, compared to June 2013 –the last month of the outgoing fiscal 2013, according to the latest data revealed by the Pakistan Automobile Manufacturers Association (Pama).

According to Global Securities, the drop in car sales is the direct result of the increase in sales tax from 16% to 17%. The newly-elected government increased the general sales tax (GST) by a 100 basis points in June 2013 when it announced the budget, which has resulted in cars being expensive for Pakistanis.

Sales of passenger vehicles (PV) declined 18% to 8,299 units during July against 10,167 units sold in June. Light commercial vehicles (LCV) also followed suit and posted a decline of 35% month-on-month (MoM) to 2,280 units, compared to 3,507 units in June.

Overall, sales of cars and LCV, when combined, declined 23% MoM to 10,579 units from 13,674 units in June of previous fiscal.

Sales of Indus Motor Company (IMC) declined by 32% MoM in July 2013, the most amongst its peers. Furthermore, sales of Pak Suzuki and Atlas Honda Cars declined 18% MoM and 15% MoM, respectively.

Indus Motor’s flagship brand the Toyota Corolla and Fortuner witnessed a decline of 35% MoM and 76% MoM in their sales, respectively.

Suzuki Cultus was the only car that recorded a growth in the 1,000cc or below engine category in July 2013. Cultus posted a significant jump of 22% in its sales in July, while Suzuki Mehran’s sales showed a decline of 17%.

Honda City was the only car in the 1,300cc or above engine category that posted an increase in sales, though it rose by just 4%, whereas Honda Civic, unexpectedly, showed a massive decline of 33% in its July sales.

Industry officials were expecting continuing growth in the sales of Atlas Honda Cars because of the recently launched models of City and Civic.

The outgoing fiscal year 2013 was not a good year for the local assemblers due of slowing car sales throughout the year. Locally assembled car sales declined significantly by 24% in during the fiscal year to 135,310 units, compared to 179,139 units in the previous year.

Automakers say their sales have been affected by the import of used cars in last few years more than anything else.

Succumbing to pressure from the local auto industry, the previous government reduced the age limit of used car imports to three years from five years in December 2012, owing to which car imports have declined significantly in last seven months.

However, lower car sales in the first month of fiscal year 2014 underscore the fact that the local auto industry may face difficulty in improving sales without launching new models or giving other incentives to the customers.

Published in The Express Tribune, August 14^th, 2013.

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