Automobile sector receives a crushing blow in latest results

August 20, 2019 (MLN): Auto sales in Pakistan during the month of July fell by 41% on year-on-year basis and 28% on month-on-month basis.

Honestly, these substantial declines in sales were on the cards even before the results were announced, all thanks to persistent price hikes, increase in Federal Excise Duty (FED) as well as energy and fuel cost.

According to the data gathered by Pakistan Automotive Manufacturers Association (PAMA), the major decline in sales was endured by Honda Cars (HCAR) at 66% YoY. Indus Motors (INDU) and Pak Suzuki Motors (PSMC) followed lead by posting declines of 56% YoY and 23% YoY respectively.

INDU has stated a decline of 56% for the said month, which according to a report by Topline securities, is its worst performance in the last five years. This underperformance can be rightfully accorded to fall in the sale of Corolla variant, which ironically, happens to be one of the most demanded vehicles of the company.

PSMC continues to get haunted by Mehran, whose production stopped back in in March, 2019. However, Suzuki Alto emerged as the saving grace for the company, as it recorded sales of 4,584 units i.e. highest amongst its peers. However, one of PSMC’s variants i.e. Wagon-R suffered in terms of market share due to launch of Alto in the entry level cars.

HCAR did not really shock the market with its performance, as it was already on a losing streak. Its pivotal variants, City and Civic, posted a decline of 68%. The performance in upcoming months will be further dented owing to another price hike by the company during July.

Now that PKR has stabilized to a certain degree, it would be worthwhile for auto companies to at least put a halt on their price hiking regime, if not decrease the prices altogether. Persistent depreciation of local currency along with higher inflation has already eroded the purchasing power of consumers, and the consequences of it are reflected in the auto results.

Copyright Mettis Link News