Car sales projected to drop to 4,400 units in February

Automobile sales in Pakistan during February 2023 are expected to hit a 14-year low at 4,400 units - baring two months of lockdown in April and May 2020, showed data compiled by JS Research.

“We preview auto sales volume for February 2023 where we foresee sales to drop to 4,400 units, down 53% month-on-month,” it said. “Monthly volumes have now hit their 14-year low and last time, similar volumes were seen in December 2008 (barring Covid).”

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The decline comes due to lower number of operation days of Toyota and Pak Suzuki amid limited raw material availability, subdued demand and deteriorating purchasing power of customers.

Sales growth during the first eight months of fiscal year 2023 dropped 46% to 91,300 units year-on-year.

Sales of Honda Atlas are expected to witness a relatively lower decline compared to its peers as the company’s plant remained operational in January and February 2023.

Ailing demand in the sector and import curbs, however, resulted in a 41% month-on-month decline. Sales of Toyota and Pak Suzuki are expected to drop 50% and 67% month-on-month respectively owing to plant closures and drop in demand.

Toyota’s plant remained closed for 14 days in February and Pak Suzuki shut down for eight days.

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“With limited forex reserves and administrative controls to curb imports still in place, volumes for the automakers are expected to remain at low levels pressed by both supply and demand side impediments,” the report stated.

“With demand staggered for the OEMs (car companies), a ripple effect can be seen in the local auto parts industry as well with manufacturers such as Agriauto Industries Ltd (AGIL) opting for plant closures as well. Even if the import controls are relaxed, automakers will continue to see a bumpy ride with sky high prices driven by sharp rupee devaluation and higher interest rates.”

Automakers have increased prices three to four times in calendar year 2023 – increasing by up to 29% in response to sharp rupee depreciation against the dollar by 12% during the same period.

Meanwhile, an increase in general sales tax (GST) from 17% to 18% as announced in the mini-budget, also prompted car companies to pass on the impact.

The demand for cars through auto financing has also been dropping as the State Bank has jacked up interest rate to 20%.

“We are expecting cumulative volume decline during fiscal year 2023 to clock in at more than 50% year on year extending into the first half of fiscal year 2024 as well,” read JS report.