Ongoing fiscal year: Auto sales expected to post 3-year high, analysts predict

Sales depend on Punjab govt’s Apna Rozgar Scheme, new models.

KARACHI: Car sales are expected to reach their highest level in three years by the end of June 2015, analysts have predicted, stressing that the growth is depended on the sustained success of new models.

With a 24% improvement during the first nine months (Jul-Mar) of fiscal year 2015 (FY15), sales of new and used vehicles picked up in March and are now expected to reach their highest in three years by the end of the current fiscal year.

“Auto sales are expected to grow in double-digits but they are highly dependent on automaker’s new models,” Global Research analyst Asad Raza Nayani told The Express Tribune.

“The sales depend on the new make of Toyota Corolla and Punjab government’s Apna Rozgar Scheme,” Nayani added.

The growth of automobiles in FY15 is expected to touch 165,000 units, 23% compared to last year, he said. But, that will still be low compared to 175,000 units sold in FY12.

Looking at March 2015 sales alone, one can be a little more bullish in the remaining three months (April-June) of FY15.

According to latest figures posted by the Pakistan Automotive Manufacturers Association, local auto sales, including light commercial vehicles, shot up by an impressive 72% to 21,147 units compared to 12,269 units during the same month last year.

According to Sherman Securities, car sales in March are possibly the highest-ever sales posted by the Pakistan auto industry in a single month.

If monthly car sales grow at the same rate as they did in March 2015, which it possibly can, cumulative car sales may touch a six-year high.

However, analysts are not yet entirely optimistic as the auto industry is still facing considerable challenges despite many positives including growing margins of auto companies, declining interest rates and double-digit growth in sales.

“The interests rates have come down considerably in the last four months, but banks are still cautious when it comes to auto financing which is not helping car sales considering its potential,” Nayani added.

Industry officials and analysts estimate that car financing still stands at a mere 30-35% of the total car sales in the country, which is considerably low, compared to other countries.

Banks are reluctant when it comes to car financing due to its bad experiences during the last few years when Non-Performing Loans (NPL) ballooned and considerably hurt the financial health of banks.

The cumulative sales during the first nine months (Jul-Mar) of FY15 stood at 124,000 units, up 24% compared to 100,000 units in the same period of previous year. However, sales growth drops to 19% if car sales under the Punjab taxi scheme that was launched in February 2015 is excluded.

Published in The Express Tribune, April 12^th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.