Outlook brightens for auto sector amid rising sales

LAHORE: The auto sector of Pakistan has recently touched a new level of sales in the four-wheeler passenger category, brightening up the future for this sector of the economy. Stakeholders are optimistic about further growth in coming months as far as sales numbers are concerned, but some said that it has yet to be known if the entire variants sales in recent months claimed by different Original Equipment Manufacturers (OEMs) have reached the end consumer and are running on roads.

The industry stakeholders, government officials including the prime minister are now quoting the record sales of two and four wheelers as an outcome of their economic policies in public speeches; however, this is a fact that investors and car dealers are actively involved in recent record sales of cars. Stakeholders believe that this practice of car holding by dealers and investors have offset the impact of tax cuts and incentives given by the government.

The customer has to wait for three to six months as delivery period from different manufacturers. Another option for the customer is to pay their own money or premium for instant delivery of their respective variant, and many opt for the latter and pay hefty amounts. “People have taken advantage of the recent drop in auto prices as prices are likely to increase once again due to various factors, top of which is depreciating Pakistani rupee against the US dollar,” said Adeel Usman, Managing Director Regal Automobiles – a company currently assembling and selling five Chinese variants in Pakistan.

“The recent record sales are once in a blue moon scenario for the industry and people involved in this business know it,” he said, adding that the issue of own money has now reached American and the UK markets as well and showroom is demanding own money which previously was selling same variants on discounts. “All this is due to scarcity of different materials, nonetheless this is a global issue, normally in Pakistan’s auto market the ratio of end customers and investor is around 70:30 per cent in total sales,” Usman stated.

“It is an easy investment which brings good returns for investors.” Pakistan’s total car sales witnessed a 90% jump during fiscal year 2020-21. A total of 238,000 cars were sold in the period under review. During the first month of fiscal year 2021-22, a record 24,918 cars were sold in a single month. Global car sales are expected to remain just below 70 million units in the year 2021. Worldwide car sales were recorded at 63.8 million units in 2020.

Pakistan is also looking to sell 300,000 units for the current fiscal year, however, end customer facilitation is a key for sustainable growth. “There is a supply constraint in the Pakistani auto market for sure that raises business interests in this sector,” said CarFirst Chief Executive Officer and Co-Founder Raja Murad Khan while speaking to the Express Tribune.

“Prices are fairly inelastic in Pakistan and a recent 5-6% drop in prices has given a jump in demand for cars, however with a decline in price the premium on different cars has increased, off-setting the tax cut initiative by the government and pointing out mismatches, the auto market currently has,” he added. Khan stated, “We need to understand the market, segment by segment. There should be a bit more work done for volumes especially in low engine category, the option should be available in such categories as this particular segment has huge potential which can be explored.”

“This segment is currently being neglected and companies are competing in SUV category primarily due to greater margins.” The CEO added he is optimistic Pakistan will produce more cars in future as demand is already there.

“Recently a big number of cars have been booked by investors and dealers and we do not know if the entire variants are on roads or at hold by these market investors,” he said, adding that there is a dire need to cut down delivery time by OEMs and creating a mechanism for market forces responsible for artificial shortage of different variants only to take a good return on their investments.