CSPK
FULL MEMBER
New Recruit
- Joined
- Apr 19, 2017
- Messages
- 81
- Reaction score
- 0
- Country
- Location
In the recently concluded FY23, a total of just 96,812 units of locally assembled vehicles were sold, down 59% against 234,180 units sold during FY22 according to the data released by the Pakistan Automobile Manufacturers Association (PAMA). This is also the first time ever that the sales of PAMA members which include big names such as Toyota, Suzuki, Honda, Isuzu, Gandhara (Chery), Sazgar (Haval & BAIC), and Hyundai stood below the 100,000 units mark in a fiscal year.
Import restrictions that were put in place to save the outflow of precious foreign reserves, caused a crippling supply chain issue and were a major factor in the enormous reduction in sales during FY23. In the absence of genuine localization, due to a lack of inventory in hand, most of the mainstream players have been observing non-production days and plant shutdowns, as the “local” auto industry remains heavily dependent on imports.
However, if we dissect, the sales of mass-market cars (sedans & hatchbacks) have suffered from an average cumulative decline of around 65%, however, in the case of super-expensive SUVs & 4x4s, the decline in sales is hardly around 37% on average.
To make matters worse, car financing has been in a slump due to rising near-prohibitive bank lending rates (which is now a whopping 23% of interest) and SBP’s tightening of auto financing restrictions. Given that around 40% of new car sales used to come via bank financing, a large impact on sales volume is understandable since it’s nearly impossible for anyone (at least salaried class) to purchase a car via financing. As a result, it is fair to assume that most of the vehicles sold during FY23 were mostly purchased in cash (without financing).
During FY23, sales of fuel-efficient models such as Cultus, Wagon-R, and Alto all experienced declines of roughly 50%, 70%, and 77%, respectively. This stands in stark contrast to the sales of expensive crossovers & SUVs, which are flying off the shelves. About 10% of all passenger vehicle sales were 4x4s and SUVs in the previous year FY22. Given how awful the economy is, this has increased dramatically to 19% of overall volumes in FY23. SUV sales have been boosted by more models being launched in the country, a wider range of options, and restrictions on CBU imports. Additionally, it appears that consumers have enough resources to purchase pricey premium models (without financing) even when the country is dangling in the situation of “either about to default or will survive another day.”
Since consumers are still purchasing larger & expensive automobiles in significant numbers, it is not surprising to see both established brands and newcomers launching extremely expensive vehicles during the worst economic conditions. In contrast, mass-market car sales are significantly declining. As opposed to selling thousands of cars with little profits and carrying the burden of providing top-notch after-sales support to each & every customer, these expensive cars give the automakers ample profit margins against a very small number of sales, and with fewer units comes lesser worry about providing a satisfactory after-sales service.
Assemblers’ trust will be restored by the eventual IMF bailout and the lifting of import restrictions, but concerns that high-interest rates will destroy demand derived from bank financing will continue to exist. In the midst of this, sales of expensive 4x4s and SUVs are likely to creep up as the economic divide continues to widen. But for the industry as a whole, overall sales volume will come down further due to mass market options going beyond the reach of common buyers.
Full article: https://carspiritpk.com/are-new-automobiles-only-for-the-wealthy-and-resilient/
Import restrictions that were put in place to save the outflow of precious foreign reserves, caused a crippling supply chain issue and were a major factor in the enormous reduction in sales during FY23. In the absence of genuine localization, due to a lack of inventory in hand, most of the mainstream players have been observing non-production days and plant shutdowns, as the “local” auto industry remains heavily dependent on imports.
However, if we dissect, the sales of mass-market cars (sedans & hatchbacks) have suffered from an average cumulative decline of around 65%, however, in the case of super-expensive SUVs & 4x4s, the decline in sales is hardly around 37% on average.
To make matters worse, car financing has been in a slump due to rising near-prohibitive bank lending rates (which is now a whopping 23% of interest) and SBP’s tightening of auto financing restrictions. Given that around 40% of new car sales used to come via bank financing, a large impact on sales volume is understandable since it’s nearly impossible for anyone (at least salaried class) to purchase a car via financing. As a result, it is fair to assume that most of the vehicles sold during FY23 were mostly purchased in cash (without financing).
During FY23, sales of fuel-efficient models such as Cultus, Wagon-R, and Alto all experienced declines of roughly 50%, 70%, and 77%, respectively. This stands in stark contrast to the sales of expensive crossovers & SUVs, which are flying off the shelves. About 10% of all passenger vehicle sales were 4x4s and SUVs in the previous year FY22. Given how awful the economy is, this has increased dramatically to 19% of overall volumes in FY23. SUV sales have been boosted by more models being launched in the country, a wider range of options, and restrictions on CBU imports. Additionally, it appears that consumers have enough resources to purchase pricey premium models (without financing) even when the country is dangling in the situation of “either about to default or will survive another day.”
Since consumers are still purchasing larger & expensive automobiles in significant numbers, it is not surprising to see both established brands and newcomers launching extremely expensive vehicles during the worst economic conditions. In contrast, mass-market car sales are significantly declining. As opposed to selling thousands of cars with little profits and carrying the burden of providing top-notch after-sales support to each & every customer, these expensive cars give the automakers ample profit margins against a very small number of sales, and with fewer units comes lesser worry about providing a satisfactory after-sales service.
Assemblers’ trust will be restored by the eventual IMF bailout and the lifting of import restrictions, but concerns that high-interest rates will destroy demand derived from bank financing will continue to exist. In the midst of this, sales of expensive 4x4s and SUVs are likely to creep up as the economic divide continues to widen. But for the industry as a whole, overall sales volume will come down further due to mass market options going beyond the reach of common buyers.
Full article: https://carspiritpk.com/are-new-automobiles-only-for-the-wealthy-and-resilient/
