KARACHI - Auto assemblers showed a lackluster performance during the quarter ended on June 30 2008, as the net profit of the auto sector declined from Rs2.1 billion in April -June 2007 to Rs828m in April-June 2008, reflecting a phenomenal decline of 61pc. Declining volumetric sales amid rising costs were the main reasons behind this sharp fall. Analysts attributed 14pc decline in volumetric sales to the halt in auto financing facilities, prolong political uncertainty, escalating inflation and increasing car prices. The evaluation was based on the financial performance of three major assemblers Pak Suzuki, Indus Motors and Honda Cars having a combine share of 94 per cent in the total auto sector sales. Higher product prices, however, gave some support to the top line as rupee sales fell by only 6 per cent. Adding to the problems was increase in cost of sales causing a 700 bps decline in gross margins for the sector to 4.9 per cent, analysts added. The costs rose primarily due to 26 per cent yen appreciation against rupee on Year on Year basis. Moreover, international steel prices increased drastically in the past one year causing raw material costs to swell.  Hence, net profits for the sector declined from Rs2.1b in April-June 2007 to Rs828m in April-June 2008, a phenomenal decline of 61pc.   The two leading auto assemblers Indus Motor and Pak Suzuki showed lackluster performance during the last quarter. While Indus showed a volumetric sales growth of 2 per cent in the quarter, Pak Suzuki's unit sales fell by 18 per cent. The companies witnessed high cost of sales as the cumulative cost per unit went up to Rs549k in April-June 2008 as compared to Rs456k during the same period last year. Therefore, profits fell by 51 per cent and 69 per cent for Indus Motor and Pak Suzuki, respectively. Honda Atlas, however, posted an earning increase of 76pc as the company improved its profits of Rs20.2m in April-June 2007 to a net profit of Rs35.6mn in April-June 2008. Although company's EBIT fell by 29 per cent during the period, a 74 per cent decline in financial costs resulted in net profit growth for the company. The company retired long-term loans amounting to Rs2b during year ended March 2008. Analysts said that government has tried to restrict luxury items purchase in order to curtail imports by imposing huge import duties. Inline with this strategy, it has also imposed 5 per cent FED and increased sales tax by 1 per cent on purchase of vehicles both imported and local. This is likely to keep volumetric sales for local auto assemblers under pressure. Furthermore, the rupee/yen parity and steel price scenario is not expected to improve in the near future.