Equity Analysis /
Pakistan

Pakistan Autos: Severe sales decline continues due to higher retail prices

    Ahmed Raza
    Ahmed Raza

    Investment Analyst

    Intermarket Securities
    12 September 2019

    Pakistan's auto industry sold 10,222 units in August, down 42% yoy/19% mom as demand continues to suffer from a sharp 15-20% price increase (inclusive of the revised FED) from July. This was the lowest month for auto sales since Dec'12. There were lower working days in August due to the Eid holidays, which may have further contributed to this decline.

    Again, the most severe decline was witnessed in volumes of Honda Atlas Cars (HCAR), which were down 67% yoy in August. HCAR is more sensitive to interest rates due to the higher mix of auto-financing sales. On the other hand, Pak Suzuki (PSMC) fared better than peers (down 24% yoy in August) due to the presence of its newer model, Alto. Sales was down 63% yoy excluding Alto, close to industry performance. Unit sales of Indus Motors (INDU) contracted by 57% yoy with a major drag coming from Corolla. As per media reports, INDU will likely replace Corolla Gli/Xli with a new model, Toyota Yaris.

    Tractor volumes dipped by 37% yoy in August due to poor farmer economics and higher prices. PAMA reported 2/3 wheeler sales dropped by 10% yoy, but recovered 13% on a monthly basis.

    Decline in 2M FY 19 exceeded our expectations and we will likely revisit our volume assumptions. We currently remain cautious on the sector as this sharp volume decline may continue until the end of H1 FY 20.