Car sales increase by 14 per cent

Higher demand despite rising prices leaves some analysts baffled.

KARACHI: Car sales continued to rise in October despite an increase in vehicle prices and depressed demand from flood-hit areas.

During the month, 11,911 cars were sold compared to September’s figure of 10,405 units, an increase of 14 per cent, according to data released by the Pakistan Automobile Manufacturers Association on Thursday.

Higher sales despite rising prices have left some analysts baffled. “Surging Japanese yen against the rupee, lower agricultural income and depressed demand from flood-affected areas along with high interest rates are a recipe for lower car sales,” commented BMA analyst Sana Bawani.

“The rupee has already depreciated by 15 per cent so far in 2010 and car-makers have kept announcing price increases,” she added. “Continuous price increase may in fact be the reason for the rise in demand for cars.”

She asserted that “car dealers anticipate that prices will rise further and they may be stocking up to lock in higher profits.”

Production of cars also stepped up as 12,168 cars were produced in October compared with 10,021 units in the preceding month.

Sales of trucks, buses slow down

Sales and production of trucks and buses declined in the month under review as 211 units were manufactured against 326 units produced in September. Sales also dampened to 237 units from 343 units in the preceding month.

Meanwhile, sales of motorcycles and three-wheelers improved slightly to 67,565 units from 61,233 units, after lacklustre demand in the first three months (July-September) of the current fiscal year.

InvestCap analyst Abdul Azeem downplayed the impact of losses to the auto sector due to recent floods in the country. “Prices of cotton and sugarcane have skyrocketed in recent days,” said Azeem highlighting that this will off-set losses faced by agriculturists.

“Going forward their earnings will improve and so will their ability to afford new automobiles,” he added.

Experts appear divided over the future trend in car sales, as they concur that prices of cars are likely to keep rising in coming weeks because of weakening rupee against Japanese yen.

Published in The Express Tribune, November 12^th, 2010.