Maroc - EURASIAREVIEW.COM - A la une - 02/Sep 15:23

Pakistan: Car Sales Drop To Lowest In 15 Years – OpEd

In FY24, the auto sector struggled with sluggish demand recovery as total industry sales dipped by 6%, reaching 151,983 units. The industry saw muted sales throughout the year. Total industry sales remained subdued despite a low base effect caused by supply chain challenges and plant shutdowns from the previous year, resulting in a weak recovery. INDU reported total sales of 31,104 units, marking a 33%YoY decrease. However, SAZEW 4-wheeler sales reported at 5,374 units in FY24. Total industry sales reached 17,717 units in June 2024, marking a 24% increase compared to the earlier month. Major improvement in volumes were witnessed by Passenger cars. Auto sales saw a monthly increase, yet the sector is anticipated to require additional time for complete recovery. According to a report by AKD Securities, higher prices and financing rates dampen FY24 volumes. Total industry sales in FY24 reported at 151,983 units as compared to 161,632 units in FY23, marking a decline of 6%YoY. The year saw negative growth throughout FY24, despite a low base effect caused by supply chain challenges and plant shutdowns from FY23, resulting in lowest annual volumes since FY21. Overall, decline in volumes for passenger cars and LCVs were reported at 18%YoY during FY24, lowest since FY21. This decline may be attributed to two primary factors: 1) excessively high car prices and 2) record financing rates. To note, passenger car prices have doubled since FY21, with auto assemblers citing the blame on: 1) supply chain challenges, 2) currency devaluation and 3) higher taxation. However, there was some respite in prices during FY24, with OEM’s choosing to reduce amidst a stable currency and excessive over supply amidst falling demand. Moreover, tractor sales experienced a 47%YoY surge, possibly fueled by enhanced agricultural activity during the year. INDU and HCAR sales INDU reported total sales of 31,104 units, marking a 33%YoY decrease. Additionally, HCAR witnessed a decrease of 22%YoY during FY24, reporting 16,879 units sold during the year. Despite reducing prices for the City during the year to compete in the industry’s price war and benefiting from a low base effect caused by multiple days of plant shutdown in FY23, the volume did not recover. However, SAZEW 4-wheeler sales reported at 5,374 units in FY24, marking 2.94xYoY increase. Auto sales recovery in June 2024 Total industry sales reached 17,717 units in June 2024, marking a 24% increase compared to the earlier month. Major improvement in volumes were witnessed by Passenger cars. The brokerage house believes the upswing was driven by consumers buying cars ahead of the FY25 budget in anticipation to change in tax policy, to evade extra charges resulting from potential tax policy alterations. Investment Perspective The recovery in overall volumes during FY24 was insufficient, remaining far below the peak levels seen in FY18 and FY19. Sales of passenger cars and light commercial vehicles (LCVs) were notably weak, declining by 18% as compared to FY23. This decline was primarily due to excessively high car prices throughout the year, coupled with record auto financing rates. Looking ahead to FY25, the brokerage house projects FY25 Passenger car & LCV sales to grow by 10% (FY25 GDP growth at 3%YoY), potential monetary easing leading to increase in auto financing, thereby revitalizing growth in the auto sector. Nevertheless, new entrants in the auto sector pose a threat to existing OEMs and their market share.