Pakistan’s Auto industry recorded sales of 19,423 units in Dec’18, down 1%yoy, this takes 1HFY19 volumes to 120,422 units, down 3% yoy. During 1HFY19, Economy segment declined by 24% yoy due to a tougher economic environment but 1300cc and above provided a robust 11% increase, mitigating the overall decline, says a report of Intermarket Securities.

Indus Motors (INDU) continue to show positive growth with unit sales of 5,324 units in Dec’18, up 16%yoy as Corolla posted 10%yoy growth. Hilux also posted 84%yoy growth in Dec’18 to 992 units, likely due to a big ticket order. Pak Suzuki (PSMC) posted a positive but meagre growth of 2%yoy in Dec’18 as sales stabilized among commercial vehicles (Ravi and Bolan). Possible reasons include buyers getting used to new regulations (non-filer ban) and preemptive buying ahead of further price increases. Honda Atlas (HCAR), on the other hand, sold only 2,367 units during Dec’18, down 26%yoy. However, we think Jan’19 numbers will give a better idea of demand situation, as buyers place higher value to a new-year model.

Tractor sales nosedived to just 654 units, down 87%yoy due to decline in agricultural activity (for example, cotton production is provisionally down 8%yoy for FY19) amid water shortage concerns and higher fertilizer prices. Maintenance shutdown of Millat Tractors (MTL) also contributed to this decrease. Additionally, 2/3 wheelers sales slipped 16%yoy in Dec’18 due to inflationary pressures, particularly higher petrol prices

News reports suggest that the upcoming mini-budget will potentially bring in more negatives for the sector; Higher GST (from 17% to 18%) will increase car prices while increases in additional customs duty (from 2 to 3%) will push raw material cost.