KARACHI, Nov 11: Production and sales of cars surged by 26 and 23 per cent, respectively, during the first four months (July-October) of the current fiscal as compared to corresponding period of last year.
It shows that consumers still prefer locally-assembled cars despite rising imports of used and new cars after the budget.
A total of 47,171 units (Suzuki, Toyota, Honda, Cuore, Hyundai and Santro) were produced and 47,110 units were sold in the period under review as against 37,321 and 38,216 units produced and sold in the same period of previous fiscal.
It was assumed that the increase in interest rates would have a negative impact on car demand but so far it had yet to cause a stir, market analysts said, adding that huge holding of cash on their books, the rising interest rates scenario was benefiting the car makers by way of higher interest income.
Besides, it was also predicted that the arrival of used and new cars would change the market scenario and buyers would go for foreign cars. So far, the budgetary decision of cutting import duties on completely built-up units had yet to pose any serious threat to the local assemblers and even many buyers were still reluctant to take the risk of purchasing imported cars.
Faraz Farooq at Jehangir Siddiqui Research said that as duties on cars up to 1,300cc were kept unchanged by the government, no major threat to local car makers was expected because about 85 per cent of total cars sold in the country were of below 1,300cc.
Increase in depreciation rate to two per cent on used cars’ import and allowing import of three-year old car under the gift and baggage scheme, the market share of used cars was likely to increase slightly, but would not dampen the local car sales as was evident from the July-October figures. Besides, the locally-assembled cars were still cheaper, he added.
He said that brand loyalty, resale value, after sales service and spare parts availability were major considerations that kept customers preference skewed towards local cars.
Mohammad Sohail, head research at Jehangir Siddiqui, said that car demand was still very high and there was shortage of 15,000-20,000 units to bridge the gap between supply and demand.
Car sales would continue to show decent growth on the back of positive economic indicators and rising per capita income. He was of the view that car population was still short if compared with rising population of the country.
On the contrary, premium on locally-assembled cars was still flying high between Rs25,000-Rs150,000 depending on the models. Besides, there had been no change in the delivery period of cars ranging between two months to six months.
The government has been pressurising car makers to take notice of this situation but no strict action has been taken so far to redress the grievances of car buyers. Besides, car makers have also allotted quota to the authorized dealers by regulating new car booking as per supply requirement. In this situation, authorized dealers mainly discourage buyers who prefer cash buying.
Premium on Suzuki Mehran manual and CNG ranges Rs25,000-Rs50,000 while the premium on Toyota Corolla models hovers between Rs100,000-Rs150,000. Premium on Hyundai Santro is Rs50,000-Rs60,000 while the on Honda City it ranges between Rs60,000-Rs70,000.
General Manager Marketing Pak Suzuki Motor Company Ashfaq Hussain said that car and light commercial vehicles sales during calendar year 2005 was expected to touch over 170,000 units as compared to 129,000 units in 2004.
He said over 60 per cent cars were mainly being sold through leasing finance as against 25 per cent through cash. Corporate buying was also picking up.
He added that auto makers were regulating the new car booking in order ensure that the delivery period should not extend over four months.
