Auto sector performance and outlook.

• Author: Kazmi, Shabbir

Byline: Shabbir Kazmi

Reportedly, utilization capacity, on stated double shift capacity basis of major OEMs for CY19 declined as compared to CY18 as the industry dealt with a hampered demand outlook, specifically as consumers suffered from 'sticker-shock' over rabid price hikes. The lessons for CY20 remain the persistence of the 'new model effect', witnessed in CY19 segment-wise sales, likely to play out in the case of INDU. Moreover, improvements in purchasing power, either from monetary loosening or relative rupee stability, accompanied by tax concessions for consumers (removal of FED) could catalyze demand in the coming year.

CY19 total industry sales of 191,085 units, down by nearly 28%YoY) consisted of 161,004 passenger cars (PC), 25,025 LCVs, 4,294 trucks and 762 bus units, marking the single largest decline since CY08, taking annual unit sales back five years to CY14-15 levels. PC sales were increasingly reliant on modest slippages in low-mid segment vehicle market (800CC/1000CC segments as opposed to drastic declines in the premium 1300CC plus segment.

The pleasant surprise was that car sales went up by 23%MoM to 12,100 units in December 2019. The rise was largely led by 49%MoM increase in sales of Pak Suzuki Motor Company (PSMC). The other two major manufacturers, Indus Motor (INDU) and Honda Car (HCAR) sales dropped by 12%MoM and 23%MoM respectively.

The increase in sales of PSMC was largely driven by the announcement of increase in car prices by the manufacturer in mid of December 2019, which was scheduled to become effective from 1st January 2020. The decline reported by the other manufacturers was largely in line with the historical year-end phenomenon, where consumers generally delay their purchases until the New Year.

On a YoY basis, weak demand dynamics was again evident from a 38%YoY fall in sales in Dec-2019, taking 1HFY20 decline to 44% YoY. This is primarily attributable to 1) higher car prices mainly due to Pak rupee deprecation and 2) higher interest rates.

PSMC sales were down 26%YoY in December 2019, while INDU's sales declined by 56%YoY with Corolla sales falling by 50%YoY. HCAR sales fell by 58%YoY during the month under review with combined sales of City and Civic declining by 56%YoY.

Sale of motorcycles by Atlas Honda (ATLH) witnessed an increase of 6%YoY as sales rose to 85,000 units. However, it recorded a decline of 11%MoM.

Tractor sales recorded a growth of 75%YoY with Millat Tractor (MTL) sales rising by...