According to the Pakistan Automotive Manufacturers Association (PAMA), auto sales tumbled 29.3% year-on-year (y-o-y) in March 2014 to 9,614 units. The sharp fall in March sales, however, can be attributed to the 'New Year Model' phenomenon whereby consumer demand eases after the start of the year. This has not derailed the mild recovery in the sector, which we highlighted back in August 2013 ( see 'Sales To Recover But Production Faces Challenges', August 29 2013).
Vehicle sales for 9MFY2013/14 (July-June) rose 2.2% y-o-y, to 100,220 units. We believe vehicle sales will continue to grow at a modest pace for the rest of FY2013/14 and maintain our full fiscal year sales forecast of 142,500 units, an increase of 3.5%.
Strength In Rupee To Lift Sales
Another factor which contributed to the sharp drop in March sales was deferred purchases by consumers due to expectations of price cuts in the near future. The Pakistani rupee has appreciated significantly against the US dollar in recent months and we believe this will give carmakers room to discount their prices given that a lot of assembly components are imported. With assemblers usually taking roughly three months to pass on the impact of a stronger local currency, we see upcoming price discounts as another tailwind for sales for the remainder of FY2013/14.
In fact, Indus Motor Company (IMC), the local assembler for Toyota Motor, has already reduced the prices of some its models. This helped the firm to become an outperformer in March with a 15.6% y-o-y increase in its sales, to 4,051 units. IMC's sales in recent months have also been helped by the Corolla model. This trend is expected to continue in FY2014/15 when the new Corolla 2014 is assembled in Pakistan. In fact, some Toyota dealerships are already taking pre-orders for the new Corolla due to strong demand.
Production Boosted But Currency Backslide Remains A Risk
The growth in domestic sales has carried over to auto production, with output for the first...
The Pakistan Autos Report features the latest data and forecasts covering production, sales, imports and exports.
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