Car sales drop by 50% as rising prices suppress demand

• Car sales drop by 50% in August.
• Auto industry also hit by import restrictions.
• Hyundai sales increase to 1,929 units in August 2022.

Pakistan’s auto sector has witnessed a massive decline in sales — the lowest in more than two years — due to rising prices which have suppressed demand coupled with import curbs hurting production, The News reported.

According to data released by Pakistan Automotive Manufacturers Association (PAMA) on Tuesday, sales fell 50% to 8,980 units in August from a year ago.

That’s the lowest since June 2020 when 7,325 units had been sold during the coronavirus pandemic. Sales fell to 10,378 units in July.

The publication stated that Pakistan’s economic growth is slowing as one of the region’s highest inflation rates — and higher borrowing costs — erode demand and a 30% drop in the rupee make the import of key automobile parts more expensive.

The industry is also hit by import restrictions authorities have introduced to control the trade deficit.

Toyota Motor Corp’s Pakistan unit, Indus Motors Co, plans to shut its plant for two weeks for a second successive month while Pak Suzuki Motor Company (PSMC) is also shut because of a shortage of imported parts.

The two companies are the largest car assemblers in Pakistan and sell 85% of all cars in Pakistan.

Overall car sales can drop by more than 25% in the current fiscal year, according to Wasil Zaman, an analyst at JS Global Capital Ltd.

Recovery may be hurt by catastrophic floods that inundated about a third of the country in recent weeks, killing about 1,400 people and causing losses worth about $30 billion.

Brokerage Topline Securities said car sales (including sales of Non-PAMA members) clocked in at 14,000 units down 2% month-on-month primarily due to unavailability of CKD parts which led to non-production days by auto manufacturers.

Automakers were allowed to import only 50% of their average imports over the last 4 months in July 2022 in order to save foreign exchange reserves. The quota has increased to 60% for August 2022 and 70% for September 2022.

The brokerage house reported that auto sales are also down by 46% year-on-year amid escalating car prices, expensive auto financing, and low purchasing power of consumers.

“This takes 2MFY23 car sales to 23,498 units down 50% year-on-year from 46,656 units in 2MFY22.”

PSMC sales were down 41% month-on-month to 3,954 units in August 2022 due to plant closure amid the unavailability of CKD parts while Honda Atlas Car recorded decline of 29% month-on-month to 1,809 units in August 2022 led by decline in sales of City and Civic by 40% month-on-month.

Indus Motors posted an increase of 63% month-on-month to 3,876 units in August 2022 from 2,375 units in July 2022. Interestingly, Hyundai sales increased to 1,929 units in August 2022 as compared to 201 units in July 2022 led by an uptick in Tuscon sales primarily due to the low base.

Amongst Tractors, Millat Tractors recorded an increase of 153% month-on-month and 27% year-on-year to 2,556 units. Al Ghazi Tractors recorded sales of 1,420 units, up 14% month-on-month and 9% year-on-year.

Bike sales were up by 5% month-on-month while down 32% year-on-year in August 2022. Atlas Honda recorded sales of 85,000 units up 6% month-on-month while down 15% year-on-year.

Trucks and buses sales were up 24% month-on-month while down 43% year-on-year to 341 units in August primarily due to a drop in transportation activities amid floods and a slowdown in the overall economy.