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November 13, 2019

Car sales slide 56pc in October

Business

November 13, 2019

KARACHI: Car sales sharply fell 56 percent year-on-year to 10,853 units in October, official data showed on Tuesday, as the government’s documentation drive along with consumer waning buying power continued to take toll on the automobile industry.

Pakistan Automotive Manufacturers Association (Pama) data showed that car sales stood at 24,850 units during the same month a year earlier.

Cumulatively, locally-assembled passenger car sales registered a decline of 46 percent to 45,161 units during the four months (July-October 2019). Car sales stood at 83,201 units during the corresponding period last year.

Analysts attributed the decline in sales to documentation drive by the government, higher cost of auto financing and decline in purchasing power of consumers. Share of auto financing in total sales came down to around 35 percent. “This (fall) is primarily attributable to government’s recent drive to document the economy, higher auto prices post rupee devaluation, higher interest rates for auto financing, and overall economic slowdown,” Hammad Akram, analyst at Topline Research said in a flash note.

Analysts are expecting further slowdown in sales till December as customers like past practice usually avoid purchasing vehicles due to change in model year. Industry officials, however, are hopeful that conditions would improve during the second half of the current fiscal year owing to further stabilisation of economy, particularly exchange rate, and an expected reduction in interest rate. Car sales are expected to clock in at 160,000 to 170,000 units in FY2020 compared to 240,000 units recorded a year earlier. Sales of new and used cars significantly declined 49 percent year-on-year to 40,279 units during the first quarter of the current fiscal year.

In October, Pak Suzuki Motor Company witnessed 48 percent year-on-year decline to 6,973 units. In the four-month period, Suzuki sold 30,120 units, down 30 percent year-on-year. Indus Motor Company (IMC) saw a 61 percent year-on-year plunge in units sold in October to 2,496 units. In July-October, IMC sold 9,203 units, down 58 percent year-on-year. Honda Cars registered 72 percent year-on-year decline in units sold in October to 1,384 units. In four months, Honda sold 5,838 units, down 68 percent year-on-year.

Analysts said the Federal Board of Revenue is getting more vigil to find out people, who used to invest in auto trading without declaring their income to the tax authorities.

Besides, car prices have gone beyond the reach of many people due to frequent price hike by the assemblers on falling rupee against the dollar, imposition of federal excise duty and additional customs duty on imports of raw material. Car retail price includes 40 percent of the government’s taxes. Auto financing also shrank owing to very high interest rates, the analysts said.

IMC, which adopted production halt recently to avert slowdown impact, recognised increased emphasis on documentation by the government as a primary factor that adversely impacted the industry’s sales volume. “Moreover, the company considered high interest rates and decline in purchasing power of customers as secondary factors in impairment of demand,” Mohammad Ahmed, analyst at Pearl Securities Limited said.

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