Auto sector sees bleak October

Updated October 13, 2019

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Increasing number od plants are shutting down. — AFP/File
Increasing number od plants are shutting down. — AFP/File

KARACHI: After a steep 39 per cent overall fall in car sales during 1QFY20, dark clouds continue to hover on Japanese assemblers as Honda Atlas Cars Pakistan Ltd (HACPL) will observe 16-18 non-production days (NPDs) in October while Toyota vehicles’ assembler also paints a dismal production picture.

Market sources said situation at HACPL is more alarming owing to very high vehicle prices especially Honda Civic than its competitors. Amid depressed demand, the company on Saturday launched BR-V with minor model change (MMC) in a bid to lure new buyers.

HACPL had reduced working days to 11 in September as against 13 in August and 20 in July. The company has still around 2,000 unsold vehicles at the plant and dealership network as compared to 3,000 units last month, sources said.

A Honda dealer in Karachi said sales situation in the ongoing month is almost similar to preceding month.

Production of vehicles in October at Indus Motor Company (IMC) would remain more or less same to September data, sources in IMC said, adding that the plant is operating at a single shift which means at less than 50 per cent production capacity.

Plant shutdowns increase

IMC had observed 15 NPDs during September as against eight in July and 11-12 in August.

Pak Suzuki Motor Company Ltd (PSMCL) also had a bad first quarter FY20 but so far it had not initiated any NPDs from July till to-date despite suffering massive 73pc fall in WagonR sales in first quarter of 2019-20 as well as drop demand for other Suzuki vehicles.

“Alto 660cc has kept PSMCL as well as its vendors alive since July,” vendors making Alto parts said.

As a result of buyers’ shift from WagonR and Cultus to Alto 660cc, the company had made price hike twice – first in August by Rs137,000-Rs138,000 in VXR and AGS models and then by Rs70,000-85,000 from Oct 1.

Already under stress assemblers anticipate sales slowdown during October-December period as customers like past practice usually avoid purchasing vehicles due to change in model year.

Another reason of falling sales is absence of investors from the car market. The Federal Board of Revenue (FBR) is now more vigil in looking after those people, who without declaring their income, used to invest in cars to whiten their black money.

Sources said Toyota buyers have also adopted a wait-and-see attitude towards Corolla 1,300cc which is going to be replaced with Yaris during first quarter of 2020.

Car prices had also gone beyond the reach of many people due to frequent hikes by the assemblers on falling rupee against the dollar, imposition of federal excise duty by 2.5-7.5pc in various engine power and additional customs duty on imports of raw material. Car financing also shrank owing to very high interest rates.

Car assemblers and vendors said the government would face tax collection shortage of Rs2bn per month due to gloomy sales situation. The government takes away around 40pc of taxes on car’s retail price.

Published in Dawn, October 13th, 2019