The auto sector is finally picking up pace, expectation of which has been coming on for a while. Numbers reported by the Pakistan Automotive Manufacturers Association (PAMA) show a solid 37 percent increase in sales for all automobiles including commercial vehicles and tractors in 3MFY18 year on year. Cars and jeeps constitute nearly 68 percent of share of these sales, growing by 29 percent in the first quarter of this fiscal. Mind you, these numbers don’t include the influx of used and refurbished imported vehicles that have been growing by leaps and bounds. CBU imports grew by 108 percent for motorcars in 2MFY18—which does include imports by existing players but is a phenomenal growth rate.
Demand dynamics have only improved since financing is cheaper. More variety has been added by local players to pique interest of the growing middle class demographic. Meanwhile, the rise of ride sharing apps has made buying cars a viable business option to operate in big cities. For every imported Daihatsu Mira—which is cheap, reliable and has reasonable mileage—on the roads of urban metropolitans, there is a Suzuki Cultus and Wagon R waiting in the wing. Local players are fighting head and head.
Pakistan Suzuki Motor Company (PSX: PSMC) that captures 54 percent of the cars and pickups market is witnessing remarkable growth in sales for WagonR which competes with several imports varieties and comes out on top. Cultus with its steeper price also saw a 56 percent growth in the first quarter which has surprised many. Local cars are often preferred by consumers as they are tried and tested with a strong and cheaper parts market readily available and have resale value. Suzuki is also importing SUV Vitara and Ciaz in the sedan category to test the market but sales numbers are not available to us. We will find out how the market reacted based on whether the company decides to bring it locally.
Over at the house of Toyota, Indus Motor Company (PSX: INDU) flagship Corolla hasn’t done as well partly because of production constraints. Consumers are also waiting for the model upgrade. INDU is undergoing expansion to increase capacity as its Fortuner and new Hilux continue to hit it out of park with sales.
The star climber of the three is Honda Atlas Cars (PSX: HCAR) which introduced Honda BR-V toward the end of last fiscal year and since has achieved incredible growth grabbing a bigger pie of the market.
Meanwhile, logistics and transporting sector—which themselves are driven by retail, infrastructure and construction sectors—will continue to drive the commercial vehicle segment with several new Chinese players vying to enter the trucking and heavy vehicle market. With few barriers to entry, and given demand prospects, the trucking sector might see many new players looking to invest.
It would be remiss to not talk about the shakeup the passenger car category will see as early as the end of 2018. Many new car ventures are in the final stages of agreement with local partners with at least five assembly plants already approved by the BoI to kick off (Read our story: “Playing your cars right: An update”, published on June 5, 2017). With local players scurrying up to reach the market faster and new players entering the playing field; this is truly distortion of the best kind.
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