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Auto Sector: Pursuing the upward trail

April 15, 2021 (MLN): Pakistan’s economy is still in the phase of recovery after a brutal hit of COVID-19 and portraying commendable improvement in many economic indicators. While many sectors are already benefitting from this improvement in the economic setting, the auto sector of Pakistan- after a long hail of shrinking sales, is enjoying an upward trajectory. 

The auto industry sales in the month of March'21 surged to 20,813 units, showing a robust growth of 27% MoM even in the third wave of covid-19. The uptrend in sales is attributed to the economic stimulus in the domestic market, amid pandemic, particularly the sharp cut in interest that triggered auto financing. The new stimulus to the sale of automobiles in recent months has incited positive anticipations of an early revival.

The highest volumetric sales in percentage terms were made within the '1300 cc and above' category as passenger cars’ sales were up by 38% in the month of March, taking cumulative sales during FY21TD to 55,733 units translating into a growth of 61% YoY. Besides maintaining the highest-selling vehicle in the segment, Toyota Yaris saw a 3% MoM reduction in sales to 39% which was captured by Toyota Corolla by 6ppts MoM to 25%. Alongside, the market segment of 1300 cc witnessed the launch of Elantra by Hyundai and upwelling in the sales of Suzuki Swift which increased by almost 2 folds standing at 355 units. As projected by Foundation Securities, the launch of more cars in this segment by new entrants will further increase the competition and dilute the market share of existing players.

Moving on towards the launching of new car models- the sector has also witnessed the landing of new market players with budget-friendly and eye-catching models to offer as a result to avail Automotive Development Policy (ADP-II) 2016-2021, which encompassed attractive incentives for investors including Duty-free import of plant and machinery and concessional rates of customs duty. Resultantly, local Pakistani companies are facing healthy competition at their end which obviously pushed them to further improve both the quality and quantity of their own vehicles.

INDU observed upbeat posture with a record 53% jump in sales as compared to the previous month. On the other hand, PSMC and HCAR observed their sales grew by 14% and 30% MoM relatively less than INDU.

The tractor industry posted huge sales of nearly 5000 units, up by 24% MoM. AGTL sales surged by 40% MoM to 2,012 units, while that of MTL rose 17% MoM to 3,519 units. Given the scenario, it is expected that tractor sales will resume the uptrend in the coming months as farmer income continues to expand. MTL sales may also benefit from an increase in exports, as reported by Intermarket Securities.

According to the insights provided by BMA Capital, “despite the launch of new vehicles, the existing players have not been adversely affected, which ultimately indicates that the current demand of consumer is greater than the existing capacity of an auto sector of Pakistan. However, increased competition will be witnessed in FY22 when these new entrants gear up their production plants and reduce delivery times. Moreover, the problem of shipment delay at ports internationally, delays in supply chain and slow deliveries are expected to continue till June 2021”.

 

Copyright Mettis Link News

Posted on: 2021-04-15T15:40:00+05:00

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