Auto sales down 8 percent in FY08

[Naveed Yaseen]

By Moonis Ahmed
KARACHI: Auto sales (cars + LCVs) for the full year FY08 stood at 187,412 units, showing a decline of 8 percent when compared to 204,212 units sold in the same period last year.

Figures for the local auto sales in June 2008 were released by Pakistan Automotive Manufacturing Association (PAMA) on Friday.

On month-on-month basis, 11 percent increase has been witnessed in sales in June 2008.

“The decline in sales during FY08 has been primarily due to the following reasons: 1) Uncertain political and economic conditions 2) halt in auto financing facilities by banks due to loan defaults 3) increase in interest rates resulting in expensive auto financing 4) increase in prices due to imposition of withholding tax (WHT) and excise duty 5) further increase in prices to pass on the impact of rising costs and 6) continued influx of second hand imported CBUs,” Bilal Hameed, an analyst at JS Research in his report on the auto sector.

The increase in June has been due to the year-end effect. Assemblers as well as their distributors need to achieve their targets for which aggressive marketing policies are implemented. Assemblers offer incentives to their distributors in terms of higher commission on sales if targets are achieved. Moreover, sales of LCVs rose during this period on account of harvesting season.

Car sales fell by 11 percent to 147,441 units versus 165,268 units in corresponding period of last year. The share for Cars & LCVs in auto sales is 79 percent & 21 percent, respectively. Amongst four major vehicle assemblers, all depicted negative growth during the full year FY08. Pak Suzuki and Indus Motor performed relatively better as their sales declined by 7 percent and 2 percent, respectively. Dewan Farooque and Honda Atlas posted negative growth of 25 percent and 23 percent, respectively.

“The decline in overall market is attributable to price hikes to pass on the impact of rising input cost, slowdown in car financing amid rising mark up rates and political instability,” said Muhammad Rehan Khan, an analyst at First Capital Equities.

Performance of locally assembled vehicles or CKDs remained sluggish with 8 percent fall registered during FY08. The sector had been growing at an average growth rate of 38 percent (FY04-07) previously.

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