First month of FY24: Car sales down 57% YoY as rising prices suppress demand

Despite an ease in import constraints, the auto sector continues to endure a downtrend as car sales in July saw a big dip amid low demand.

Car sales dropped by whopping 57% year-on-year (YoY) in the first month of the fiscal year 2023-24, as per data given by Pakistan Automotive Manufacturers Association (PAMA).

The registered car manufacturers with PAMA cumulatively sold only 5,092 units in the month of July.

The month-on-month (MoM) decrease stood at 16%, as per the data.

“The issue of letters of credit (LCs) has gradually been improving, especially for large scale manufacturers if not across the board. However, the reason for a steep decline in the car sales is low demand,” an auto sector analyst Mashood Khan told Business Recorder.

“People cannot afford cars anymore,” he said.

Fiscal year 2022-23: car sales drop 56% due to high prices, low purchasing power

Khan, who is also a parts manufacturer, feared that small medium sized enterprises in the sector would not be able to sustain a depressed demand anymore.

“SMEs [small and medium enterprises] in the sector cannot survive working at 25%-30% of their capacity for an extended period.”

“Sales may go up for SUVs [sport utility vehicles] since it is an election year, but I don’t see sales going up for sedans and hatchbacks anytime soon. People are finding it difficult to run their kitchen amid high inflation,” he added.

Other auto sector analysts also see several factors affecting demand.

“Escalating car prices, expensive auto financing, and low purchasing power of consumers are among the primary reasons for the decline in sales,” wrote analyst Sunny Kumar in his report for Topline Securities.

Indus Motors Company (IMC), the makers of Toyota vehicles in Pakistan, posted the highest decline of 26% MoM, selling 1,368 units in July. It was due to low sales of Fortuner and Hilux, which dropped 65% MoM.

Pak Suzuki (PSMC) recorded a decline of 19% MoM in car sales selling 2,444 units. Its Bolan sales dropped 44% while Alto saw a decline of 25%.

However, Honda Atlas Cars recorded an increase of 61% MoM to 494 units, which was mainly due to the low base of last month.

Hyundai sales also went up 2% MoM, where Tucson sales increased by 5% to 328 units.

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Among Tractors, Millat Tractors (MTL) recorded MoM decline of 22% to 1,656 units while Al Ghazi Tractors (AGTL) recorded sales of 1,022 units – up 20%.

Trucks and buses sales were up 31% MoM at 195 units, which were 29% down if compared to July sales of 2022.

Pakistan bike sales were down 11% MoM and 24% year on year. Atlas Honda sold 62,012 units in July – which were 17% down MoM and 23% less year on year.

“Higher bike prices and low purchasing power of consumers are the primary reasons for the decline in sales,” Kumar added.

“Despite signs of supply side recovery, the path to normalcy for the sector remains uncertain as demand-related challenges are expected to negatively impact sales volumes in the coming months,” a JS Research report stated.