Pakistan Autos: Severe decline continues in Aug’19 due to higher retail prices

· Pakistan’s Auto industry sold 10,222 units in Aug’19, down 42%yoy/19%mom as demand continues to suffer from a sharp 15-20% price increase (inclusive of the revised FED) from Jul’19. This was the lowest month for auto sales since Dec’12. Aug’19 had lower working days due to 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 Aug’19.

HCAR is more sensitive to interest rates due to higher mix of auto-financing sales. On the other hand, Pak Suzuki (PSMC) fared better than peers (down 24% yoy in Aug’19) due to presence of its newer model, Alto. Sales are down 63%yoy excluding Alto, close to industry performance. Unit sales of Indus Motors (INDU) contracted by 57%yoy with 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 to units in Aug’19 due to poor farmer economics and higher prices. PAMA reported 2/3 wheeler sales dropped by 10% yoy but recovered 13% on monthly basis.

· Decline in 2MFY19 have exceeded our expectations and we will likely revisit our volumetric assumptions. We currently remain cautious on the sector as this sharp volumetric decline may continue until the end of 1HFY20. (Courtesy: Intermarket Securities Limited.)


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