AUTO SALES IN JULY 2007 START ON A LOW NOTE

MARIAM NASIR
Manager Research

Aug 20 - 26, 2007

Pakistan Automotive Manufacturers Association released the data for the month of July earlier in the week as per which Car and LCV's sale and production declined by 1% and 10% to 15,159 units and 12,826 units respectively when compared with the production and sales figure of July 2006. Production and sale of tractors during the month was down by 14% and 10% to 3,499 units and 3,457 units respectively. Sales Performance of trucks was also below par as they declined by 27%% to 332 units. Motorcycles were the only one which depicted a rise in sales, growing handsomely by 46% to 48,442 units while that of buses rose by 9% to 120 units. Decline in car sales can be attributed to maintenance shutdown at Pak Suzuki Plant, along with imposition of withholding tax rate of 2.5% on purchase of locally assembled cars and increase in Kibor rates because of increase in discount rate by State Bank of Pakistan in the prior month.

On m-o-m basis performance the situation was far under pinned as the dealers booked a large stock prior to the imposition of withholding of tax which was applicable from the start of the next fiscal year. Sales of cars dropped by 43% m-o-m to 10,516 units, LCVs sales witnessed a plunge of 50% m-o-m to 2,310 units, tractors sales plunged by 35% m-o-m to 3,457 units while only the motorcycle sales managed to post higher numbers, registering a rise of 46% m-o-m to 48,442 units respectively.

SEGMENT

JULY - FY07

JULY - FY08

CHANGE IN %

(UNITS)

PROD

SALE

PROD

SALE

PROD

SALE

Motorcycles

34,576

33,226

47,314

48,442

37%

46%

Bus

109

110

129

120

18%

9%

Cars + LCV's

15,389

14,268

15,159

12,826

-1%

-10%

Tractors

4,071

3,855

3,499

3,457

-14%

-10%

Trucks

355

454

301

332

-15%

-27%

Total

54,500

51,913

66,402

65,177

22%

26%

Total (Excluding Motorcycles

19,924

18,687

19,088

16,735

-4%

-10%

COMPANY WISE PERFORMANCE

Sales of Pak Suzuki Motors witnessed a drop of 15% y-o-y to 6,486 units. While on m-o-m basis, Pak Suzuki sales fell by 54%. This massive fall in volumetric sales is primarily due to the scheduled production shutdown of Suzuki Cultus, which resulted in only 709 units of Cultus being produced in the current month when compared to 3,127 units in the earlier month. In addition, Suzuki Alto sales witnessed a drop of 53% m-o-m from 2,803 units to 1,320 units in July 2007. Nevertheless, despite the fall in volumetric sales of all Suzuki cars, the company has continued to dominate the market and maintained 51% market share earlier being 54%. Indus Motor managed to post higher sales on y-o-y by 8% to 4,468 units which improved its market share from 29% to 35%. Volumetric growth for Indus Motor remained strong on the back of healthy demand for the Corolla, up 10.7%, while sales for the Cuore remained flat for the month. Sale of vehicles by Honda Atlas dropped by 55% m-o-m and 33% y-o-y to 1,029 units. Honda's share in the domestic higher end segment stood at 22% down from 29% last year. However Civic sales registered significant growth of 51% in Jul 2007. Honda managed to grab 8% chunk of the market which in the last fiscal year was around 9%. Dewan motors also continued its subdued performance registering a sales decline of 53% m-o-m to 754 units and maintaining a market share of 6%, same as in the last year.

MARKET SHARE IN THE CAR SEGMENT

Market share of the companies witnessed a significant change in the current month. Pak Suzuki market share which stood around 57% in FY07 dropped to 45% in the month of July, reason earlier cited. Indus Motor benefited from the maintenance shutdown at Pak Suzuki's plant and increased its market share to 42% from 29% in FY07. Honda Atlas share dropped to 10% from 11% in FY07 while that of Dewan rose from 2% to 3%.

OUTLOOK

The government has recently raised the discount rate by 50 basis points, signaling a continuation of the State Bank's tight monetary stance. This has resulted in an increase in Kibor which as a trickle down effect has increased the leasing rates much higher and has put further pressure on auto loans growth. Hence the sales of auto are expected to remain bit low not as the trend has been over the past few years. Along with that the 2.5% withholding tax and 1% excise duty goes into effect from 1st September, 2007 as a result of which the local assemblers have already issued a new price-list, with 3-5% higher prices up by Rs.5,000-30,000. The hike in prices should have no long-term impact on auto sales growth but in the short term it will keep the situation uncertain.