- It is the first time since FY12-13 that sales declined during the first half of a fiscal year
KARACHI: Pakistan’s locally manufactured car sales went up by 1pc on a year-on-year in December 2018 as compared to the same month of last year. However, sales registered an increase of 11pc on a month-on-month basis as compared to Nov 2018.
It is the first time in 12 years (since Dec 2005) that sales have increased in December on a MoM basis. This brought the first half FY2018-19 sales to 120,066 units, down by 3pc YoY. It is also the first time in five years (FY12-13) that sales declined during the first half of a fiscal year.
Despite seemingly better numbers in Dec 2018, analysts continue to expect a significant slowdown in auto sales owing to the deteriorating economy, law barring non-filers from purchasing cars and multiple price hikes in the past 12 months.
The MoM increase in sales is contrary to the historical trend where sales fall in the month of December due to seasonal factors. This increase is primarily due to higher sales in Pak Suzuki Motor Company (up 38pc MoM).
Indus Motors (INDU) recorded robust yearly growth of 16pc led by 84pc and 10pc increase in the sales of Hilux and Corolla. On the other hand, Fortuner sales declined by 33pc. On a monthly basis, volumetric sales were down three per cent while sales went up 8pc YoY for the first half 2018-19.
INDU has been able to maintain its volumetric growth despite the macroeconomic headwinds. This is attributable to the strong order book of the company that existed, where lead times for some variants of the company used to be as much as 5 months.
However, the lead times have now come down to a month or less for most variants as demand has slowed down and capacity constraints in the plant have been resolved. Moreover, it must be noted that the company continues to carry out capex in order to increase its production capacity to 75,000 units. Further, the analyst believes that rising interest rates will benefit other income of the company where INDU has a massive Rs29 billion in net cash and short-term investments (net of advances from customers).
Honda (HCAR) sales fell by 26pc YoY and 31pc MoM while sales for first half 2018-19 fell by 2pc YoY. The yearly fall in sales in Dec 2018 was led by 50pc lower BR-V sales and 19pc lower sales of City and Civic units. HCAR had been showing a robust trend in monthly sales up until Oct 2018 (sales up 8pc YoY in 4 Months FY19).
However, with thinning of its order book, as depicted by the decline in lead times (cars available in 15 days to a month), the company started showing a slowdown in sales where in the past two months, volumetric sales fell by 24pc YoY.
Sales of BR-V have shown the worst decline as the initial high growth phase of the new car came to an end. Although analysts expect monthly sales to recover slightly in January, they continue to predict a yearly drop in the volumes. Moreover, it must be noted that the company’s cash and short-term investments have fallen to Rs14.3 billion as of September 2018 compared to Rs31.6 billion in March 2018 due to decline in advances from customers, analysts believed.
