Automobile sales to dive in light of economic slowdown: Elixir Securities

December 07, 2018 (MLN): Positioned a few days away from the release of automobile sales figures for November, Ms. Farheen Irfan at Elixir Securities’ research department believes that the offtakes for the month will mark a long awaited slowdown.

In her research note on automobiles, she forecasts that the sale of passenger cars in November will have come down by 26% MoM and 13% YoY, logging in at 18,279 units.

She attributes this decline to slowdown in economy, lift off in interest rates that made car financing expensive, soared car prices due to rupee devaluation and ban on purchase for non-filers. “One additional reason for MoM decline can be the high base, last month”, adds the note.

Elaborating on this further, Farheen told Mettis Link News that, “during the month of October, some of the manufacturers had forewarned that a potential price increase of up to Rs.75, 000 was in line for December and January. Due to this, the buyers indulged in pre-booking of cars, causing automobile sales to soar during the month.”

“Moreover, as a result of expected rupee devaluation dealers invested in cars as well, thereby pushing the sales further up in October”, she added.

Categorizing the sales by assemblers, Honda Atlas Cars (HCAR) is expected to have made 24% lesser sales compared to October 2018, and 15% lesser compared to November 2017.

Similarly, Pak Suzuki (PSMC) is expected to have sold 9,000 units in November marking declines of 33% MoM and 20% YoY, “however, the actual numbers (to be released by PAMA next week) may show some variation against our estimates for PSMC,” forewarns the note.

Although, defying the weak dynamics of the sector as a whole, Indus Motors (INDU) is expected to uphold a positive growth of 2% YoY, due to enhanced capacity (debottlenecking) and changing sales mix of the company as it converged back towards Corolla vs. high end production.

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