Massive decline in Car Sales as higher Prices keep Buyers away

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Massive decline in Car Sales as higher Prices keep Buyers away

  • Rough start of the new Fiscal Year for Auto Industry as car sales decline by 38%
  • Auto Industry experiences the lowest Sales Volume in five years

Total Auto Sales of Pakistani Auto Manufacturers declined by 38% to 16,146 units in July-19 as compared to 22,280 units in July-2018. The depressing sales volume for Auto Industry continued in July as Auto Manufacturers witnessed the lowest sales volume since December-2014.

Toyota Indus and Honda Atlas Cars were significantly impacted as their sales declined by 56% and 66% respectively. Sales for Trucks and tractors also declined by 30% and 20%YoY in July-2019 due to slow down in the economy. However, a positive growth of 7%was witnessed in Bus segment as Sales increased by 44% for Isuzu.

Massive decline in Indus Toyota Sales

July turned out to be a depressing month for Indus Toyota as it witnessed a massive decline of 56% in sales as compared to July-18 and 55% decline as compared to June-2019.

Hilux and Fortuner gravely impacted Toyota’s sales as sales were down by 48% and 66% for Hilux and Fortuner respectively.

Corolla, which had previously boosted Toyota’s revenue witnessed a 57% YoY slump in its sales. The imposition of additional FED on all variants of Corolla in addition to the significant rise in prices has reduced demand for Corolla. The recent announcement by Indus Toyota of reducing its production also pints towards the bleak outlook for Toyota Indus. Moreover, the introduction of Kia Sportage/ Isuzu DMAX is also expected to impact sales of Fortuner/Hilux sales.

Indus Toyota July-19 Sales Volume, Source:PAMA

Sharp decline in Honda Volumes

The weakening sales of Honda Atlas Cars (HCAR) continued as its Sales Volume declined by 66% YoY. City & Civic sales declined by 68% YoY in the month of July. FED imposition on City along with the increased impact of FED adjustment on Civic remains the main reason for the HCAR sales decline.

BR-V also met sales decline as its sold volume declined by 35% YoY. HCAR’s high prices and the recessionary environment is expected to contain the company’s sales going onwards. This is further reiterated by the company as it announces to cut production in July.

Honda Atlas Cars July-19 Sales Volume, Source:PAMA

Pak Suzuki experiences restrained decline in sales volume

Pak Suzuki Motors Co. (PSMC) sales declined by 24 YoY and 13% as compared to last month. The new Alto Model of Pak Suzuki managed to attain Sales volume of 4,548 units. All other cars including Cultus/Swift/ WagonR/Bolan/Ravi witnessed the significant decline of 27%/64%/70%/75%/30% YoY in July 19 on the back of higher prices and slowdown in economic activity.

To recap, the decline in WagonR sales is also due to the cannibalization impact of newly launched Alto Model. Alto remains the cheapest locally produced option available to consumers, along with Pak Suzuki’s other offerings being relatively cheaper than its peers. hence,  Pak Suzuki is expected to foresee less decline compared to its competitors.

Pak Suzuki July-19 Sales Volume, Source:PAMA

Auto Sector Outlook

We at The Mint PK have a bearish outlook on the sector as multiple economic challenges along with new competition entring the market will impact existing Car Manufacturer’s sales.

The recent price increase to transfer the impact of FED and Rupee depreciation in the short run will have a further adverse impact on Auto Sales going onward.

Furthermore, Slow down in GDP Growth coupled with rising Car financing rates and the anticipated arrival of cheap Chinese brands will further slow down sales of Existing Auto Manufacturers.

Data Source: PAMA

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