Auto Sector – INDU, HCAR mark a decent recovery while PSMC lingers in the dark

August 12, 2020 (MLN): Pakistan Automotive Manufacturer’s Association (PAMA) on Tuesday released the volumetric sales and production data for the automobile sector, which showed that the sale of passenger cars during the month of July 2020 stood at 10,123 units against a total production of 8,280 units, which is around 7.7 percent lower as compared to the 10,968 units sold in the same month of last year.

While the figures may still not be very pleasing, several bigwigs have shown some sign of recovery which has restored our faith in the welfare of the auto sector. Indus Motor Company (INDU), like always, emerged as the market leader as its sales surged by almost 68% as compared to the last year. The sale of Fortuner showed an improvement of 97% on account of the low base effect, whereas Hilux showed a recovery of 36%.

Moreover, the newly launched Toyota Yaris sold 1,883 units, which when combined with the sales of Corolla, resulted in a surge of 72% as compared to the same period of last year. According to the analysis done by Foundation Securities, the demand for Corolla and Yaris is likely to continue in the future, owing to lower interest rates, lockdown easing, and recovery in economic dynamics. On the other hand, variants such as Fortuner and Hilux are all set to have an intense face-off with Kia’ Sportage, Isuzu Dmaz, and Hyundai Nishat’s newly launched Tucas which may hamper their revival prospects.

Honda Atlas Cars’ (HCAR) sales increased by 46% during the period under review, surpassing the record set by the company in January 2020 wherein it sold 2,210 units. The highest recovery was seen in the sales of City and Civic with a growth of 52%, thanks to cheaper auto financing, improving economic indicators, and lockdown easing. On the other hand, very minimal growth was witnessed in the sale of Honda BR-V, i.e. 6%.

The report sets the same expectations of strong growth for HCAR as well, but the fierce competition that Toyota Yaris is giving its counterparts may slow down, if not hamper, the recovery prospects of the company. Likewise, Kia’s Sportage Alpha, as well as Cerato whose launch is impending, may further give the company a run for its money.

Lastly, Pak Suzuki Motor Company (PSMC) emerged as the only company with declining sales figures. According to PAMA, the units sold by the company during the month exhibited a decline of 40% as compared to the same month of last year. The biggest disappointment came from Alto, whose sales declined by a whopping 53%. However, giving it the benefit of the doubt, Foundation Securities has said that the decline can be attributed to July’19 being the first proper month of Alto’s launch, and Alto not benefiting much from the lower policy rate due to being a lower-end vehicle.

Nonetheless, some recovery was seen in the sales of WagonR in the form of smaller decline as compared to the other variants, but this recovery is also being attributed to the low base effect. The sale of Cultus fell by 11%, whereas that of Ravi plunged by 42%.

Contrary to the expectations set for INDU and HCAR, the future prospects and recovery chances of PSMC still seem quite weak. This is because of the high competition within the ‘Below 1000cc’ bracket, as well as some company-specific issues such as weak macroeconomic factors resulting from high price elasticity of the segment, the report added.  

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Posted on: 2020-08-12T14:05:00+05:00