Motorcycle assemblers hit by rising input costs, falling demand, sales down 40%

[Naveed Yaseen]

By M Farhan Zaheer
KARACHI: The motorcycle industry is feeling the affects of rising cost of production, appreciating dollar and runaway inflation resulting in low sales making it difficult for most bike assemblers to continue operations.

“Karachi is home to a large number of salaried class people - a segment which is severely feeling the brunt of inflation and finding it difficult to purchase new motorcycles,” Shaheen Anwar, an authorised dealer of Atlas Honda Limited said.

Soaring inflation has been very negative for the growth of motorcycle industry. Appreciating dollar has caused the prices of imported equipment and spares to shoot up pushing bike prices further high and sales further down, he said adding motorcycle sales have dropped almost 40 per cent in last few months.

Power tariff hike and increase in minimum wages for labour have compounded the woes of industry, he said.The bike sales are falling to the point that dealers are compromising their margins to lure clients. “Sometimes the dealer has to cut his margin up to Rs2,000 to keep the customer,” Shaheen Anwar said.

When asked why Honda has increased its rates more than the Chinese counter parts Anwar said adding, “Chinese assemblers are under invoicing imports to cut overall cost of production though under invoicing causes huge losses to government.”

Muhammad Nasir, Marketing Manager, Unique motorcycles said cost of manufacturing of motorcycles have been increasing rapidly and Rs6,000 have been increased in last six months on Chinese assembled brands in the country.

From the next month, our company like many other companies is going to raise motorcycle prices to Rs40,000 from Rs39,000 owing to the appreciating dollar, he said. He attributed increase in bike prices to depreciating rupee and electricity tariff hike among host of reasons affecting the cost of different parts used in motorcycles.

A motorcycle dealer, Hafiz H Razzak of M Autos at Akbar Road said that in rorder to arrest the falling sales the government should cut duties on import of CKDs and motorcycle spares.He said motorcycle sales are dropping week after week along with the continuous increase in motorcycle prices. Rising motorcycle and petrol prices have been proved deadly for the poor segment of society - as they have few options. Public transport service is worsening with every passing day. Above all inflation is eating away the purchasing power of lower and middle-income groups resulting in lesser sales of two wheelers.

Motorcycle assembling in Pakistan saw phenomenal growth in last five years with annual output crossing one million mark in 2007-08 from just 0.371 million units in 2003-04.Another motorcycle dealer said that last three years have been very productive for the motorcycle industry of Pakistan. “Currently the industry is facing problems like increasing cost of production and declining sales. In last six months Chinese motorcycle prices have increased from Rs34,000 to Rs40,000 which means Rs1,000 a month mainly due to rupee dollar parity,” he said.

An owner of a popular motorcycle brand told The News that most of the motorcycle companies are under severe pressure owing to the declining margins and low sales. “Out of approximately 59 motorcycle assemblers in Pakistan only 10 to 12 are coping with the current crises otherwise all are under financial problems,” he revealed.

Ziauddin Ahmed, a motorcycle owner said that owing to declining purchasing power people are hesitant of purchase even necessities of life for instance a fair number of classified ads state motorcycle as a pre-requisite for job.

http://www.thenews.com.pk/daily_detail.asp?id=143435