April 9, 2019 (MLN): The sale of total passenger cars and light commercial vehicles (LCV) for the month of Mar’19 is expected to reach 23,200 units vs. 22,380 units in Feb’19, depicting a progress of 4% YoY and 18% MoM, as suggested by a research report published by JS Global Capital Limited.

That is to say, the 4% YoY growth in volumes is expected on the back of 23% YoY growth in Pak Suzuki (PSMC) unit sales, perhaps due to higher Wagon-R sales, resulting from added restrictions on its main competitor, i.e. used CBU imports. The same can be said for other variants, such as the hatchback Cultus, Bolan and Ravi.

Growth in PSMC volumes can also be attributed to higher sales of Mehran, as the company has finally put the production of Mehran to halt after three decades. Compared to Feb-2019, the company is expected to post 27% growth, owing to low base effect.

On the other hand, Indus Motor Company (INDU) is likely to post a drop of 9% YoY, mostly due to dwindling demand for Hilux and Fortuner ensuing from collective impact of price increases, Federal Excise Duty (FED) imposition, and competition from Isuzu DMAX (Hilux).

Likewise, Honda Atlas (HCAR) is expected to report 23% YoY decline in sales due to price increases and higher interest rates, leading to costlier financing. The FED imposition of 10% on above 1,700cc cars would be more negative for HCAR’s volumes, since it would apply to its Civic variant that contributes over 40% to its net revenues.

Shifting the focus on the tractor segment, both the major players i.e. Millat Tractors and Al Ghazi Tractors are likely to witness an improvement in sales by 28% MoM and 63% MoM, respectively. This would be a result of low base effect. However, on a year-on-year basis, a fall in sales is likely to continue owing to lower demand due to price increases.

As per recent reports circulating on media, the government is planning to remove the 10% FED it had earlier announced in its Finance Bill of 2019, to control the decline in volumes sold by car companies. If this plan is materialized, then it’s going to be highly beneficial for the auto sector as approximately 4% of the sector’s sales are in the 1,800cc and above engine category.

Honda Atlas is expected to highly benefit from this development as Civic has an engine capacity of 1,799cc. More so, Indus Motors may also benefit from this change as it assembles Corolla 1.8L variant.

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