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Friday, May 24, 2024

Car sales breaking records, jumped by 55pc in FY22

Car sales increased 103.5 percent year on year in June 2022

Auto sales jumped by 55 percent during fiscal year 2021-22, but growth is expected to slowdown as financing costs rise and parts suppliers struggle to satisfy demand. Car sales increased 103.5 percent year on year in June 2022.

According to Pakistan Automotive Manufacturers Association (PAMA) data, passenger car sales (PAMA member cars) increased by 54.9 percent to 234,180 units from July21-June22 compared with 151,182 units sold during the same period last year. Sales in June 2022 remained higher by 103.5 percent to 23,547, compared with 11,569 units in June 2022.

Read more: Significant increase in car sales in May 2022

Data summary implies that sales of cars below 1,000cc engine capacity grew 41% to 8,703 units in June compared to May. Sales of SUVs/ jeeps soared 31% to 4,832 units in the month, sales of 1,000cc cars surged 30% to 4,602 units, while sales of 1,300cc and above engine cars increased 6% to 10,242 units.

The record auto sales during FY22 were initially led by the reduction in sales tax and federal excise duty across the board, while the lower interest rates at the start of the year also boosted demand through auto financing.

Read more: Car sales break all records

During the period, sales of 1300 cc and above car were recorded at 104,321 units, up 39 percent compared with the same period last year’s sales of 75,097 units. It included 35,197 units of Honda Civic and City, 6,190 units of Suzuki Swift, 56,528 units of Toyota Corolla and Toyota Yaris, 3,610 units of Hyundai Elantra, 2,782 units of Hyundai Sonata and 14 units of BAIC D20.

While sales of 1,000 cc cars recorded at 46,300 units, up from 30,169 units during the FY21. This included 23,169 units of Suzuki Cultus and 23,131 units of Suzuki WagonR. Below 1000 cc cars, sales were recorded at 83,559 units from 1,403 units sold during the same period last year.

Buses and trucks saw an increase to 6,498 units in FY22 from 4,347 units in FY21.

The sale of jeeps and pick-ups increased to 45,087 units from 30,215 units sold during the same period last year. Sales of tractors rose to 58,947 units from 50,920 units.

On the other hand, the sale of rickshaws and motorbikes slightly fell to 1.821 million units during FY22 against 1.903 million units of the same period last year.

Topline Securities analyst Sunny Kumar said car sales (including sales of non-PAMA members) clocked in at 33,000 units up by 24% month-on-month primarily due to the resolution of production issues and higher working days as compared to May 2022.

Ismail Iqbal Securities’ analyst Muqeet Naeem said while talking to The Express Tribune said, “the auto sales have boomed (in FY22), but the burst of the bubble is inevitable later in the current fiscal year (FY23) in the wake of imposition of new taxes, expected hike in car prices and jump in interest rate on car financing by banks…all in July.”

The new challenge for the auto industry is the requirement for prior SBP permission for the import of CKD (completely knocked down) kits. This causes hurdles on the production side, which increases the lead time of cars that have already been booked.

Later, the government removed the tax incentives in a mini budget in January 2022, but the growth trend persisted due to the longer lead time. In September 2021, the SBP changed its prudential standards to tighten the restrictions for auto financing, which was further tightened in June 2022. The latest auto loan figures showed a 0.4 percent month-on-month increase. From November 2021 to May 2022 (post-regulations), the average growth in auto financing was only 1.1 percent, compared to a monthly average growth of 3 percent from July 2020 to October 2021.