AUTO SALES REBOUND

SHAMSUL GHANI (shams_ghani@hotmail.com)
Jan 25 - 31, 20
10

Pakistan's auto industry managed to increase product prices even during global financial crisis when auto manufacturers were offering hefty discounts to keep their inventories moving.

Despite a sizeable investment during consumption-led-growth era, the industry remained heavily import-dependent. We obviously failed to attract foreign investment on capital formation side.

Pakistan's depreciated rupee and the industry's heavy dependence on import saw the auto prices going steadily up even during recessionary periods. In the absence of efficient mass transit systems, acquiring of personal transport has become a necessity, unlike the yesteryears when owning a car by the common man was a dream.

One is now ever prepared to acquire a car or at least a motorbike by cutting on spending on the three traditional necessities-food, clothing, and shelter.

The auto manufacturers have their own side of story. In the wake of a weak domestic currency and surging steel and components prices, they find it extremely hard to maintain their bottom lines without frequent upward price adjustments. The domestic demand is there - and it will continue to grow steadily to justify their unilateral price hike action.

The industry enjoyed an extended honeymoon period until both exogenous and indigenous factors combined together to throw the economy into a tailspin. The honeymoon period anyway, is set to return after a short interlude.

The economy has started to pick up and so has the inflation. But, transport having acquired a prominent place in the hierarchy of basic human needs, the car and motorbike sales are steadily going up. The change in the hierarchy is substantiated by the fact that a higher interest rate and restrained auto loaning have made little impact on the resurgent demand.

The locally assembled cars have registered an increase of 34 percent during Jul-Dec, 2009 over the figures of corresponding period of 2008. Pak Suzuki Motors Company Limited, taking full advantage of its market position, has recently increased unit prices from Rs.10,000 to Rs.100,000 for its various makes and models. The company sales management expects a 10 to 20 percent increase in sales during the next half of FY-10.

SUMMARIZED HISTORICAL AUTO SALES (UNITS)

VEHICLE 2005-06 2006-07 2007-08 2008-09 JULY-DEC 2009-10
Cars 165965 180834 164650 82844 53565
Trucks 4273 4293 5350 3136 1498
Buses 927 978 1195 686 289
Jeeps 2520 3397 1448 1066 472
Pickups & LCVs 18951 19981 21314 15400 7478
Farm Tractors 48802 54052 53203 60351 33609
M/Cycles & 3-Whlrs 516640 467353 643317 493895 339760
Source: PAMA

FY-07 was the boom year for car sales when 180,834 car units were sold. In sharp contrast, FY-09 turned out to be a difficult year when only 82,844 units were sold. FY-10 appears well set to surpass the FY-09 mark, yet it must end well below the boom year's sales figures. Sales of light commercial vehicles, vans, jeeps, pick-ups, and buses have recorded a fall during Jul-Dec, 2009. The sales of trucks, farm tractors, and bikes have gone up. While the higher unit sales of trucks and farm tractors augur well for the economy, the record high unit sales of motor cycles and three wheelers show that the inefficient, expensive, and risky public transport system has made the masses keen on having their personal means of transport.

VEHICLES PRODUCTION & SALES POSITION

VEHICLES JUL08 DEC08 JAN09-MAR09 APR09-JUN09 JULY09 AUG09 SEP09 OCT09 NOV09 DEC09
Cars 1300cc/more Prod Sales 1942 1382 2055 1561 10943 11612 11855 12182 4113 4351 4356 4326 3767 3895 5054 5097 4309 4011 3263 2655
1000cc Prod Sales 2111 1105 917 365 2146 2821 3110 3650 1605 1555 1813 1753 2086 2024 2687 2526 2121 1577 1621 1552
800cc & more Prod Sales 4654 3182 1562 763 4736 4780 6070 5827 3015 2654 2710 3311 2257 2943 3818 3487 3082 2987 2497 2861
Total Cars Prod Sales 8707 5669 4534 2689 17543 19213 21035 21659 8733 8560 8879 9390 8110 8862 11359 11110 9512 8575 7381 7068
Trucks Prod Sales 492 347 205 210 610 783 966 961 266 278 265 238 210 228 284 232 249 204 219 318
Buses Prod Sales 108 52 12
23
114
158
254 235 84
60
57
53
44
46
55
54
62
55
18
21
Jeeps Prod Sales 182 211 5
 -
110 201 221 284 129
71
109 148 63
33
72
60
68
96
78
64
Pick Ups Prod Sales 1909 1538 1432 1190 2314 1342 2505 3457 1202 1265 1094 1479 1051 979 1545 1117 1428 1293 1135 1345
Farm Tractors Prod Sales 3881 3525 5490 6051 14947 14835 18307 19216 4903 4433 5216 4736 5052 3921 6182 6179 6290 7947 6384 6793
M/Cycles & 3 Whlrs Prod Sales 47109 46105 31993 32348 107174 107966 145473 145751 54516 53666 52678 51945 52700 53488 67548 66743 56721 56492 56434 57426
Source: PAMA

While the first six months of FY-10 have recorded an overall increase in major vehicular segments, a month-on-month basis comparison shows that production and sales peaked during October 2009 but showed a declining trend thereafter. The resurgent inflation and increase in prices could well be the reasons behind this trend.

The Pakistan Steel Mills crisis that has seen it operating at 35 percent capacity is certainly a bad omen for the economy in general and auto industry in particular. Unless swiftly resolved by the government, the crisis may result in auto prices going still higher.