Pakistan's Auto Sector fails to bounce back despite improvement in economic conditions

December 11, 2019 (MLN): The jinx upon the Automobile industry has been extended to yet another month, as another decline in sales by 44.4% YoY and 11% MoM was witnessed in November, simultaneously marking it as the worst month for the sector over the last five year.

This persistent decline has now put everyone in a hopeless state, as even the improving economic conditions of the country do not seem to be making any difference to the minds of the consumers, who have willfully turned their backs on the auto industry post the entire rupee depreciation saga.

However, it would be unjust to put the blame on the consumers, for it is evident that their purchasing power was heavily dented after the major auto companies started hiking the prices in a quest to transfer the burden of higher input costs on them. Besides, the increase in Federal Excise Duty by the state, coupled with a higher consumer financing rate, further irked the entire situation.  

As already stated in the report done earlier, almost all segments within the auto industry, be it passenger cars or buses, trucks or jeeps, saw a decline in the volumetric sale despite the absence of negative triggers.  Company-wise, Honda Cars suffered the most as it endured a decline of 62% in overall sales, followed by Indus Motor at 52% and Pak Suzuki Motor at 31%. It is pertinent to mention here that this persistent decline in sales and mounting losses have forced some of these companies to hold non-operational days and operate at low utilization levels in order to reduce their overheads.

Giving his view on the deteriorating position of the automobiles in Pakistan, Chief Investment Officer at Tundra Fonder, Mattias Martinsson said that this decline in the volumetric sale is a reminder to the equity market to have sober expectations on short term improvements in sales and profitability.

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