Pakistan Autos Report Q2 2010

Pakistan’s car sales for the first six months of FY09/10 have increased 27.62% year on year (y-o-y), to 53,565 units. October 2009 has been the strongest month year-to-date, with total monthly car sales of some 11,110, according to figures released by the Pakistan Automotive Manufacturers Association (PAMA). One reason for October being such a strong month is that it came before carmakers moved to increase prices to counter the effects of exchange-rate fluctuations which had been adversely affecting margins. The most recent monthly data (for December 2009) showed total car sales of 7,068. This was an 18% decline month-on-month (m-o-m), but a sharp 260% increase y-o-y. Indeed, with car sales showing a 27.62% increase over the first half of FY09/10, we believe that risks to our previous forecast of a 5% increase in car sales for the current fiscal year could now lie to the upside and we have raised our growth forecast for the car segment to 33%.

Turning to car segments, the strongest cumulative increase in sales over the first six months of FY09/10 has come from the 1300cc and above segment, where sales have risen by 62.66%. The 800-1000cc segment recorded growth of 27.62%, with the 1000-1300cc segment seeing the slowest rate of growth over the six-month period, of 13.49%.

Pakistan rounds out BMI's Business Environment Ratings for the automotive industry in Asia Pacific in 14th place with a rating of 38.9 from a possible 100. The market is held back by low production growth potential and an average rating for sales growth. However, as a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS) under the auspices of the WTO, the country's regulatory environment scores well. A number of free trade agreements also contribute to this criterion, although forming FTAs with non-Asian countries would improve this rating further. Despite low marks for bureaucracy and corruption, the market does score well for its long-term economic risk and policy continuity.

The competitive landscape remains restricted to a handful of players, however. Indus Motor took advantage of growth in the higher engine capacity passenger car segment, with sales of the Toyota Corolla up by 99.07% for the first six months of the financial year. However, another of Indus’ models, the Daihatsu Cuore, suffered a 43.53% decline in sale over 6MFY09/10. Taken together, sales of the Toyota Corolla and the Daihatsu Cuore accounted for a total market share of 37.6% for Indus Motor over the first six months of the year. Pak Suzuki's market share (based on sales of the Liana, Swift, Cultus, Alto, Mehran and Bolan models) for the six months stood at 51.4%. Pak Suzuki launched five variants of the Suzuki Swift in October.

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