Car sale posts 57 percent decline in first two months

[Naveed Yaseen]

KARACHI (October 05 2008): The auto assemblers all over the world are going through a tough time as the car sale has declined in almost all countries in the first two months of FY09, mainly due to change in auto finance policies by the suppliers of funds, analysts said.

In Pakistan, the local car sale plunged by 57 per cent on yearly basis to 13, 316 units in first two months of FY09. On stand-alone basis, the decline in car sale is 51 per cent and 60 per cent in July 08 and August 08, respectively, as compare to the same months of corresponding year.

The declining trend in car sale was started in FY08, where passenger car sale remained 9 per cent less than FY07. Interestingly, during preceding six years (FY01-07), passenger car sale in the domestic market depicted an impressive CAGR of 28 per cent.

The decline in car sale is attributable to the rising car prices in the wake of soaring input costs and taxes, Kamran Rehmani, an analyst at First Capital Equities said. Moreover, the declining car financing (due to stringent policies of the banks and rising interest rate) equally throttle cars sale's growth, he added.

More interestingly, this is not the domestic phenomenon only as more or less for the same reasons (as mentioned above for local car assembler), auto assemblers in all over the world are going through a tough time.

This phenomenon is mainly attributable to change in auto finance policies by the suppliers of funds. As pre-emptive measures amid at mortgage crisis, auto financiers have become more fastidious or reluctant of disbursing auto loans along with demanding higher mark-up due to raising concern over recovery. Moreover, recent hike in discount rates by central banks of almost all counties has also worsened the auto sale patterns. The situation is less vulnerable for oil rich countries.

According to many international publications, US car sale dropped for 10th consecutive month in August 08. And, on yearly basis, the decline in August 08 was recorded at 15.5 per cent. Similarly, European auto assembler also witnessed 15.7 per cent decline in their August 08 sale, on year-on-year basis. Apart from developed zone, car sale in major developing economies like China, India and Thailand has also dropped in the month of August.

In August 2008, the car sale declined by 60 per cent in Pakistan, 26.2 per cent in Italy, 18.6 per cent in UK, 15.7 per cent in Europe, 15.5 per cent in USA, 13.0 per cent in Thailand, 12.8 per cent in Japan, 10.4 per cent in Germany, 7.1 per cent in France, 6.2 per cent in China, 4.4 per cent in India and 1.0 per cent in Malaysia.

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