Car sales in Pakistan plunged by 46 percent during July-November

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By Mushfiq Ahmad

KARACHI: Car sales dropped sharply in the first five months of the current fiscal year, indicating the worsening health of the economy and falling purchasing power of consumers.

According to figures released by Pakistan Automotive Manufacturing Association (PAMA), car sales stood at 33,858 during Jul-Nov 2008 compared with 62,815 in the same period of last year, a decline of 46 percent.

Cumulative sales of cars and LCVs also continued their slide and stood at 49,050 units for Jul-Nov 2008, showing a decline of 38 percent year-on-year from 78,946 units during the corresponding period of last year. On a month-on-month basis, unit sales was down by 35 percent.

“Political and economic instability, increase in car prices and high rates of car financing remain the key issues behind the decline in sales,” said Syed Atif Zafar, an analyst at JS Research.

November 2008 saw a massive fall in sales of Pak Suzuki, Dewan Motor and Honda Atlas by 41 percent, 53 percent and 58 percent on a month-on-month basis, respectively.

Decline in sales of Pak Suzuki can be attributed to increase in car prices by the company at the beginning of the month in range of Rs 30,000 to Rs 70,000. Moreover, no production by Dewan Motor was one of the reasons for their decline in sales.

Car sales declined by 46 percent month-on-month and 54 percent year-on-year. Decline in car sales of Pak Suzuki was a major contributor to the decline, as industry unit car sales stood at 5,193 units versus 9,599 units in Oct 2008.

The main loser in market share in Jul-Nov 2008 has been Dewan Motor as its share fell from 5 percent in Jul-Nov 2007 to 2 percent. The main beneficiary of Dewan Motor loss has been Honda Atlas Cars as its market share increased from 8 percent to 10 percent. Moreover, Pak Suzuki’s market share increased by 150 bps to 62 percent while Indus Motors market share fell by 83 bps to 24 percent.

Sales of autombiles have been falling for more than one year now owing mainly to the increased rates of interest charged on loans. Besides, the 25 percent high inflation has pushed many potential buyers away, as they spend a lot more money on daily-used items.

Automobile manufacutring had boomed when interest rates were low thanks to the increased liquidity avialable with Pakistani banks after the 9/11 attacks. Banks and leasing companies were liberal in giving loans to individuals and stiff competition between them was going on to capture auto financing business. Now that number of defualts are rising because of increased interest rates, they have tightened their policies. Many banks have even stopped auto financing. There has been hardly any advertisement for car loans on televisions and newspapers for quite sometime.\12\17\story_17-12-2008_pg5_3


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