USED IMPORTED CARS DOMINATE AUTO INDUSTRY
Sep 24 - 30, 2012
The auto sector faced a set back in 2008-09 when the world witnessed its biggest financial crisis. In contrast to this Pakistani auto and allied sector showed recovery. The good agriculture support prices set up by the government and the high remittances encouraged growth in the automobile industry.
In the two years' period the automobile industry grew at an average growth rate of 26.5 percent and sales reached a level of 127,944 units in financial year 2011. Pakistan's total car market was about 235,000 units in July 2011-June 2012 period.
Indus Motor Company earned Rs 4.3 billion in net income on sales of Rs 75 billion in 2011-12, representing an increase 57percent in net income and 25 percent in total revenue over previous year. Toyota Motors sold over 55,000 cars during the financial year that ended on June 30, 2012, its highest ever for a single year.
1000cc category has been leading the growth in fiscal year 2012 with a growth rate of 35 percent over the same period last year. The major growth driver within this category is Suzuki's Cultus, which managed to grow by 38 percent.
Suzuki's Swift which has gained vast customer confidence and managed to grow by 86 percent in 8 months of fiscal year 2012 over the same period last year. Company wise Suzuki led the growth with a rate of 35 percent in the 8 months of fiscal year 2012 over the same period last year. The growth includes the purchases made under the yellow cab scheme of the Punjab government.
In the fiscal year 2012 was the most misfortunate year for Honda. Honda's Japan plant was shut down due to tsunami and then Honda's Thailand plant was shut down due to flooding. The unavailability of components which Honda Pakistan procures from overseas plants resulted in three months of complete suspension in Honda Pakistan.
According to figures released by Pakistan Automotive Manufacturers Association, car sales have taken a further decline in the last two months fiscal year 2013 witnessing a phenomenal decline of 30 percent year on year.
Car sales have been going constantly down amid the increasing inflow of imported CBUS and comparatively higher prices of local manufactured cars. The massive increase in the prices of locally manufactured variants due to adoption of euro-II emission standards has increasingly made local favorites such as PSMCs Mehran unattractive to the price-sensitive buyer who is looking towards imported options that cost more or less the same but look and drive better.
Pakistani car buyers are not largely attracted by factors such as fuel efficiency cars which are pretty expensive. They are increasingly steering away from buying brand new cars.
As a result of this foreign cars imported under the gift and personal baggage scheme by auto dealers has risen to an astounding 54,000 units in fiscal year 2012.
Witnessing a 37 percent year-on-year decline, sales for Pak Suzuki remained reduced in August.
Indus also took a lower status once again, with sales of the country's favorite Sedan reigned in at 5,264 units, down 28 percent from the 7,362 units sold in Aug11. Suzuki Swift and Indus Hilux have managed to retain positive growth in terms of sales.
A survey carried out by Pakwheels- one of the most relevant classified websites in the country- with the help of YouGov, a British based research organisation has recently found that among the respondents, only 32 percent had bought a brand new car in the last year while 65 percent had claimed to purchase second hand vehicles.
Imports of cars are gaining ground. 26 out of every 100 cars sold in 2011-12 were imports. The share of imported cars has phenomenally increased as more than 55,000 cars reached the country, up 162 percent from 21,000 cars imported a year ago.
In line with the local trend, Toyota, Suzuki and Honda constitute the largest share in the import market. Other than these three, Mitsubishi and Nissan also have a noticeable share.
Car purchase especially purchasing a second hand car in Pakistan is driven by economic factors such as fuel efficiency and value for money but factors such as environment friendliness are not as important to the Pakistani buyer as of now.
Conventional banks, Islamic banks and leasing companies are all financing used automobiles, in addition to the locally assembled new automobiles. The number of new vehicles on the road may decline substantially in the coming months.
The unending power crisis is the biggest concern of this sector. Further, rising fuel price has pushed up the cost of production. The devaluation of rupee against Yen has heightened up the input costs and foreign exchange risk. This sector is dependent on the import of vital parts from Thailand, Japan, Korea, etc.
Besides escalating costs auto-sector also has to face the unreasonable import government policies. Due to inflow of smuggled auto parts from neighboring country and MFN status to India the allied sector face tough competition.
The government should support the new entrants but not at detrimental to the surviving players. The automobile manufactures are of the opinion that the import of reconditioned vehicles was a cancer for the automotive industry. According to them the government should prepare a new automobile policy, which should be acceptable to every stakeholder.
Pakistan's auto industry believes that government should discourage import of used cars and other used vehicles by amending the existing liberal used cars policy to safeguard the interest of the local auto industry and vendor industry employing over 400,000 people directly and two million indirectly.
The auto sector estimates that Pakistan's local auto industry is likely to see increase demand of locally produced cars from 184000 units in 2011-12 to 222000 units in 2013, 259000 units in 2014, 293000 units in 2015, 323000 units in 2016 and 349000 units in 2017.
If the government revises its present used cars policy, it is expected there would be more tax collection on sale of increased new cars, there would be more job opportunities in auto assembly as well as vender industry.
The improved policy would definitely attract more foreign investors in sector and all this would help reduce the reliance on import by spending precious foreign exchange.
Pakistan's auto industry has estimated that due to the benefits given by the government on import of used cars and other vehicles some 40,000 vehicles are likely to be imported in to Pakistan during 2011-12.
Import of used cars in such a large number would badly affect the production of the local industry, but would also result in extremely lowering job opportunities in the entire chain of the local industry particularly the vender industry.
The auto industry conceives that due to depreciation of Pakistan Rupee against United States Dollar, Japanese Yen and Thai Bath, prices of used cars has increased tremendously and import of used cars has not been so much useful. In spite of this, traders are making a large amount of money from this business concern.