LAHORE  - Pakistan local car assemblers’ sales including cars & LCVs (Light Commercial Vehicle) remained at 137,000 units in FY14 versus 135,000 units last year. The stagnant volumes can be attributed to higher imported car inventory, in addition to imposition of higher taxes in Federal Budget FY14 i.e. 1% higher GST, 10% FED (Federal Excise Duty) on 1800cc+ cars, higher registration/withholding taxes and relaxation of import duties on hybrid vehicles.

As per latest figures, amongst three local car assemblers, car sales of Pak Suzuki and Honda Cars increased by 2.6% and 11.5% whereas Indus Motors showed a decline of 10%. Growth in PSMC sales was mainly triggered by Ravi, Cultus and Bolan which increased by 15.7%, 10.3%, and 8.9%respectively.Meharn and Swift sales declined by 8.9% and 15.9%, respectively. On the other hand, increased ‘City’ sales by 21.8% helped HCAR to post volumetric growth of 11.5%. As for INDU, ‘Corolla’ sales declined by 10.8% to 29,087 units in FY14 mainly because of weak sales trend in last three months as people deferred their buying decision till the availability of new model of Corolla, we believe.

As per estimates, used car imports may settle at 24,000 units in FY14, down 37% as compared to 38,000 units in FY13. This decline can be attributed to higher base effect of FY12 during which 54K units were being imported.

For FY15, Muhammad Tahir Saeed, an expert with Topline Securities, estimates local car sales will increase by 30% to 178K units, provided ‘Punjab Govt. Taxi Scheme’ is launched and completed in FY15. In the next 12 months, they foresee PSMC volumes to grow by 40% and INDU by 15%. Strong growth is likely to stem from high PSMC sales as Punjab Govt. has budgeted Rs50b to subsidize 50K cars under ‘Taxi Scheme’ in FY15. Moreover, declining inventory of imported used cars, economic recovery and expected fall in interest rates will provide support to car sales. Though, net car financing increased by 106% to Rs11.1b during 10MFY14, there is still a room for further growth. As of April 2014, car financing stands at Rs62b which is 45% lower than peak of Rs113b in Dec 2007. Furthermore, ECC (Economic Coordination Committee) has given a sentimental boost to the confidence of investors and customers by lifting the ban on import of CNG (compressed Natural Gas) kits for OEMs (Original Equipment Manufacturers) on July 4, 2014. Corolla’s new model, coupled with removal of 10% FED from ‘Fortuner,’ is expected to serve as major catalyst for the INDU volumetric growth in FY15. In case Punjab Govt. Taxi Scheme is delayed and deferred to next year (FY16), overall sales will grow by only 4% to 142K units in FY15 as compared to 137K units in FY14.