Blame it on the month of Ramadan where business activity is often lethargic that passenger car sales between April and May-18 fell by 15 percent (production: 11%); and grew only by 4 percent in May-18 year on year. In the 11MFY18 period however, passenger cars and jeeps leapt up by 21 percent crossing the 200,000 units mark even before the fiscal year could end. That’s a first for the sector; but will it be able to maintain this growth trajectory in the upcoming months given the latest restriction in the budget on the purchase of new vehicles by non-filers? It’s doubtful. Car assemblers have been in fact cancelling bookings of non-filers after receiving notices from the government.
According to data report by Pakistan Automotive Manufacturers Association (PAMA), the automotive industry excluding motorcycles saw a 24 percent growth in 11MFY18 with commercial vehicles and tractors growing by 28 percent.
Amongst the three carmakers, Pakistani Suzuki (PSX: PSMC) leads the pack now with 56 percent market share against 53 percent this period last year. The company raised prices for a third time in May but despite the earlier price hike, sales growth numbers do not demonstrate any slowing down. Wagon-R that saw a nearly 6 percent price hike in March is still the fastest growing car model. In May-18, the variant’s sales grew by 40 percent year on year (11MFY18: 66%).
The other favored performer is Cultus which grew by 25 percent during the period. These cars face competition from the many used cars variety coming through mostly in the small engine category. But so far, they haven’t put a dent in Suzuki’s growth. Perhaps with the new restriction on new cars for non-filers, consumers will make that shift toward used cars. The company’s pickup has managed to maintain its market share and has grown in congruous with demand despite facing competition from the FAW carrier which is slightly more costly but is considered to be better quality. Unfortunately sales numbers for FAW carrier are not available to do a more accurate comparison.
Honda Atlas Cars (PSX: HCAR) to its part has continued its winning streak since FY17 by raising its market share to 20 percent during the current fiscal year against 18 percent last year. Having introduced a first of its kind subcompact crossover SUV, the Honda BR-V has quickly gained market acquiesce. It captures many of the features of an SUV as well as a compact car that can be interesting combination for families. The variant sold over 6 times more units compared to 11MFY17.
That is not to say it has the SUV market beat, however small that market is in Pakistan currently. Indus Motors (PSX: INDU)’s Fortuner has also performed well tripling sales numbers in 11MFY18 year on year. While it may not be a dead ringer for some of the more popular SUVs like Prado or Land Cruiser, it holds its own given it is close to the shape, size and capacity of the other SUVs but may be cheaper given the others are imported in CBU forms while Fortuner is locally assembled.
Indus’s flagship Corolla has not seen positive growth in a while, even though the car remains one of the top choice for car buyers since time immemorial. The company recently attempted to enhance capacity but it is not keeping up with consumer appetite. The company has also been cancelling bulk bookings to discourage the prevalence of investor driven car market where investors buy cars in large quantities and sell them off on premium. But the incidence of this illegal activity rose only because consumers had to wait for over 6 months for the delivery of this vehicle.
Needless to say, if Toyota cannot keep up with demand, car buyers will move on. With so many new car manufacturers bidding to enter the playing field, it won’t be long before Toyota loses even more market share than it already has. In 11MFY18, its market share is 24 percent against 28 percent last year.
New car ventures arriving as early as 2019 is encouraging for the industry not doubt, but in the short run, it would seem sales will drop all around for locally assembled vehicles due to the restriction on non-filers. Even if this new condition can persuade consumers to file taxes, it will affect sales to a large degree since a consumer cannot be placed on the active taxpayers list unless he has filed taxes for two years at least. Moreover, the condition will lead to a worsening problem of the premium market as well as an increased demand for imported used cars, which are a whole different ball game altogether.
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