Auto sales plunge on supply constraints

By Staff Reporter | The Express Tribune Sep 14, 2022

Pakistani car sales, including sales of non-PAMA (Pakistan Automotive Manufacturers Association) members have clocked in at 14,000 units, down by 46% in August 2022 against the corresponding period last year. This comes amid escalating car prices, expensive auto financing and low purchasing power of consumers.

“The drop was primarily due to the unavailability of Complete Knocked Down (CKD) kits which led to non-production days by auto manufacturers,” explained Sunny Kumar, Deputy Head of Research at Topline Securities. “In order to save foreign exchange reserves, automakers were allowed to import only 50% of their average imports over the last four months till July 2022. The quota was increased to 60% for August 2022 and 70% for September 2022,” he added.

Compared to the previous month of the same year, auto sales have plunged by 2% in August 2022. This takes car sales in the second month of FY2023 to 23,498 units, down 50% year-on-year from 46,656 units in same period of last year.

Auto Analyst Arsalan Hanif noted, “The decline in auto sales on a monthly and yearly basis is due to constraints in the supply of key raw materials brought about by restrictions as companies need to obtain prior approvals for imports”.

“As a result, original equipment makers (OEMs) were unable to operate at full capacity and the biggest OEM (Pak Suzuki) extended its automobile plant shutdown due to a lower inventory level,” he added. “In the past, the State Bank of Pakistan (SBP) had placed restrictions on the import of CKD kits, but even now, automakers are having difficulty with clearance of their import consignments,” said Asad Ali, Auto Analyst at Al Habib Capital Markets.

“As a consequence, Indus Motors shut their plant for 13 days in August owing to insufficient inventory levels to maintain production activities. Likewise, Pak Suzuki closed down their plant from August 18, 2022, citing similar reasons,” he stated.

According to Topline Research, “Sales of Pak Suzuki Motor Company (PSMC) were down 41% month-on-month to 3,954 units in August 2022 due to plant closure amid unavailability of CKD parts.”

Honda Atlas Cars (HCAR) also recorded a decline of 29% month-on-month to 1,809 units in August 2022 led by decline in sales of City and Civic by 40% month-on-month.

Indus Motors (INDU), however, posted an increase in sales of 63% month-on-month to 3,876 units in August 2022. In comparison, total sales in July 2022 amounted to 2,375 units, said Kumar. Hyundai sales also increased to 1,929 units in August 2022 as compared to 201 units in July 2022, led by an up-tick in Tucson sales primarily due to a low base.

Insight Securities Auto Analyst, Ali Asif said, “We believe volumetric sales are likely to remain low going forward as the automobile industry is struggling to get letter of credits (LCs).”

Amongst tractors, Millat Tractors (MTL) recorded an increase of 153% month-on-month and 27% year-on-year to reach a sales figure of 2,556 units. Al Ghazi Tractors (AGTL) recorded sales of 1,420 units, up 14% month-on-month and 9% year-on-year, as per Topline Research.

Pakistani bike sales were up by 5% month-on-month but down 32% year-on-year in August 2022. Atlas Honda (ATLH) recorded sales of 85,000 units, up 6% month-on-month but down 15% on a year-on-year basis.

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