After a solid wrap for FY18, the auto industry has started the new fiscal year with the same gusto as last year. Well, at least the passenger car segment has. Trucks, buses, jeeps, pickups and tractors all show a year on year decline in sales in Jul-18 against this month last year, even as production rose. There could be a shift in demand but it was expected to come about in the passenger car segment, rather than the commercial vehicle segment.
According to numbers published by the Pakistan Automotive Manufacturers Association (PAMA), passenger cars grew by 21 percent, 16 percent, and 6 percent for 1300cc, 1000cc and 800cc cars respectively with a decline of 38 percent to jeeps in July-18 against this month last year. Month-on-month, sales have been phenomenal in the 1300cc segment. The commercial vehicle segment paints an odd picture. Production for Hino (27%), Master (36%) and Isuzu (41%) grew in July-18 year-on-year but sales actually fell as evident from the table.
The passenger car growth comes despite the three-phase price hike by automakers between Dec-17 and Aug-18 ranging from 5 and 15 percent across different variants. But sales remain unaffected—including pickup sales, Suzuki sales grew by 4 percent, Toyota by 18 percent and Honda by 10 percent.
Individual car trends remain more or less the same (details: “Autos: To uncertain beginnings”, published July 16, 2018) For Pakistani Suzuki (PSX: PSMC), Wagon-R continues to be a top performer despite the price hike of 9 percent. The company has announced the discontinuation of one of its Mehran models, and is expected to phase out production altogether for the 20 year old vehicle over the next year or so. So far, the company has raised prices for Mehran by 15 percent over the past few months but demand (sales Jul-18 YoY: 20%) has persevered.
Honda Atlas Cars (PSX: HCAR) has been slowly growing its market share with strong sales of the new Civic and City as well as the new locally assembled crossover SUV Honda BR-V. Its growth can be ascertained by its growing market share—in FY18, it was 20 percent (FY17:18%, FY16:12%). The spacious family and off-road friendly vehicle BR-V had been selling like hot cakes but growth simmered down in Jul-18 compared to Jun-18 as well as Jul-17.
Indus Motors (PSX: INDU) with its flagship Corolla is witnessing a turnaround; sales grew by 18 percent against a production of 12 percent in Jul-18 year-on-year. The company had raised capacity to 75,000 units working overtime. The company had cancelled bookings of many investors that were suspected to be buying in bulk and selling them off on premium. This aspect has made it all the more difficult to ascertain what the demand actually is.
Like BR-V, Fortuner is also showing a slowdown in Jul-18 but it would be too soon to give a verdict on its demand as well. It has had a phenomenal run in FY18—sales tripled that fiscal year compared to FY17. The variant competes with Toyota’s other more popular SUVs like Prado which are imported into the country in CBU form at extremely high import duties.
Though luxury vehicles tend to be income elastic—as incomes rise, people tend to buy more of it. But the opposite is true as well. Changes in consumer behaviour will come about with evolving macroeconomics of the country. Pakistan has already entered the austerity phase—interest rates have been raised and are expected to go up a little more. Financing of vehicles may become expensive. Slow growth in the economy may slow down the auto sector’s demand over all.
For passenger cars, the price hikes have not had any significant impact on sales but over the years, each time the economy slowed down, car sales followed suite. Here’s hoping that does not happen this time especially since the market was set for a huge overhaul with a number of new players already in production phase, all set for a shake-up.
Comments
Comments are closed.