Karachi, May 16, 2012 (PPI-OT): According to recent statistics released by PAMA, sales volumes of the auto industry (Cars and LCVs) have grown up by 14%YoY in 1QMFY12 to 143,365 units. Cars sales depicted a growth of 14.6%YoY to 126,081 units in the review period. On a sequential basis, industry volumes were down by 11%MoM while car segment sates were down 8%MoM in Apr’12. AKD Securities attributes the decline in sales volume in the month of Apr’12 to possible FY13 Budget measures where news flow points towards 1) reduction in import duties of CBUs and 2) relaxation in age limits for imported vehicles.
1OMFY12 – Autos Sales
|LCVs and Pickups||17,284||15,790||9.5%||1,438||2,209||-34.9%|
Source: PAMA and PJKD Research
Regulatory threat: genuine or overplayed? Auto manufacturers are passing through a tense phase as they are facing multiple threats on the regulatory front which include i) potential for relaxation in age limit for imported cars in the upcoming budget coupled with duty reduction and ii) implementation of AIDP-II, which is primarily aimed at rationalizing the prices of locally made cars via reduction in protection duties and as well as decrease in tariff slabs for imported CBUs; in order to make the industry more competitive. At present, the three major OEMs operating in Pakistan (PSMC, INDU and HCAR) are all of Japanese origin, where by way of background, the OEMs enjoy significant bargaining power as Japan is a hefty unilateral donor to Pakistan. At the same time, the OEMs and the related downstream vendor industry are important employers as well. In a nutshell, while the FY13 Budget may potentially contain a few negatives for the auto sector (possible relaxation in age limits), AKD Securities expects the GoP to stop short of taking extreme measures. Furthermore, while AIDP-II would be beneficial for the Pakistani auto consumers, failure of the first AIDP policy does raise question marks on the implementation risk of AIDP-II.
Pak Suzuki Motors Company (PSMC): Being the market leader in sales volume, in 10MFY12 PSMC was the major contributor in industry sales volume by posting sales of 90,197 units, up 30%YoY. Mehran and Bolan have shown increase of 38%YoY and 50%YoY, respectively, in 10MFY12 mostly generated by Govt. of Punjab Taxi scheme (shown in the graph), while Swift sales increased by a robust 80%YoY to 5,909 units. In Apr’12, sales volume of the company recorded 8,837 units, down by 21%MoM.
Indus Motor Company (INDU): With introduction of new Corolla Altis and Hilux Vigo Champ, the company has posted 5.1 %YoY growth in 1OMFYI2 while MoM sales have increased by 16% to 5,203 units. In 1OMFY12, Corolla has recorded sales of 37,245 units up 6.6%YoY, Coure 3,499 units, down by 30%YoY while Hilux has recorded sales of 3,317 units in the review period, up a robust growth of 64%YoY.
Honda Atlas Cars (HCAR): HOAR recorded sales of 8,751 units in 1OMFY12, down 36%YoY, and 752 units in Apr’12 down 23%MoM. This was because production was discontinued across Dec’11-Feb’12 for Civic and Dec’11-Mar’12 for City. After restart of production, Civic and City sales were 597 units and 155 units, respectively, in Apr’12.
Tractors: Local tractors Fiat (AGTL) and Massey Ferguson (MIL) jointly recorded sales of 34,464 units in 10MFY12, down 38%YoY, and 6,295 units in Apr’12. AGTL with the sales of Fiat recorded sales of 11,954 units and MTL with the sales of Massey Ferguson recorded sales of 22,510 units in 10MFY12, down 47%YoY and 32%YoY, respectively. These large YoY declines are primarily due to earlier imposition of 16% GST on tractors (now reduced to 5%).