Considering the year-on-year analysis of car sales for the month of November 2019, we can see a dip in sales of approximately 44.4%.
In 2018, 15,334 units were sold in November compared to 8,524 units sold this year in November. A decline of 44.4% is a huge one and it is a cause for concern for our automobile industry. There are several factors that led to a sharp decline in car sales in Pakistan. One of the major reasons is the rupee devaluation against the dollar. This led to rapid inflation in the country and adversely affected the prices of cars and other automobiles.
Over the past year, car manufacturers increased prices many times to pass some of the adverse effects of rupee devaluation on to the customers. The end result is that masses in Pakistan are unable to afford cars which reduced their demand and led to an eventual fall of 44.4% year-on-year.
According to the Pakistan Automotive Manufacturing Association (PAMA), car sales also dipped by 44.14% from 87,897 units to 49,110 units from 2018 to 2019 in the months from July to November. Going deeper into the statistics, cars from Honda (both Civic and City) experienced a sales decline of 86% from 3,353 units in November 2018 to only 477 units in November 2019. This is a substantial erosion of sales for both Honda City and Civic in Pakistan. Considering the months from July 2019 to November 2019, sales of Honda Cars dipped from 20,094 units to 5,885 units.
Toyota Corolla was a little bit better off compared to both Honda Civic and City. It experienced a sales decline of 66% from 5,325 units to 1806 units in the month of November. Nevertheless, this is also a sizeable drop in sales for a popular car like the Toyota Corolla. From July to November period, Toyota Corolla faced a decline from 24,119 units to 10,090 units. The biggest decline in sales has been faced by Suzuki Wagon R which is 91% from 3,232 units in November 2018 to only 291 units in November this year. Suzuki Cultus faced a decline of 68.12% from 2,287 units to 729 units. Sales of the newly launched Suzuki Alto also dipped from 4,945 units to 3,213 units from October 2019 to November 2019 this year.
All the numbers are sounding an alarm for the automobile industry of Pakistan as it faces a severe decline in demand for its vehicles. Corrective measures must be taken by all the stakeholders to ensure the automobile industry remains afloat and restores its rigor. Both the government and the automobile industry must draft a long-term plan that must be implemented as soon as possible. The Auto Policy 2016-2021 has attracted some new players in the market and made the auto sector more competitive. Policies like these can save the automobile sector at this crucial time.
Stay tuned for more informative content and drop your opinions in the comments section below regarding the decline in sales of cars in Pakistan.
The situation looks dire for the big 3 as their sales and production figures are getting worse each month, here’s a couple of suggestions that may help to improve the situation for each manufacturer:
1. PS could increase sales for the Wagon R by simply reducing the price/margins or offering more standard features and keeping the price unchanged therefore making it more competitive and attractive to buyers. However, by simply introducing an AGS version with an increased price will be insufficient to increase sales significantly. Even though the Wagon R has been in production for 5 years, it would be disappointing if it was phased out as it is the only tall boy design on the market and is a good option for buyers – it could potentially remain in production for another 5 years (the Mehran was in production for 30 years, the current Swift has been around for 15 years )
Fortunately for PS the introduction of the Alto has taken up a lot of the slack in demand. However, this is a double edged sword, as it appears that it has cannibalized sales from the Wagon R. The Alto is ultimately a city car and a 660cc engine is going to struggle on long runs and motorways – it’s nice to visit one’s village or go on sightseeing / tours (btw I have seen the Alto reviews and videos). A standard 660cc engine on a long run is either going to power the Alto or it’s A/C compressor – its won’t do both.
So if the Wagon R is phased out, then the Alto needs to be offered with the option of an additional engine choice which has more power i.e. the turbo version of the R06A or the K10B (which is also a 3 cylinder engine and should drop in quite easily into the Alto without too much retooling) – this would enable the Alto to handle motorway mileage more comfortably.
2. Atlas Honda from a strategic position is in the worst situation of the big 3, especially with the upcoming introduction of the IMC Yaris sedan which is likely to take sales from the Honda City. Therefore the latest
City needs to be introduced asap, but more critically Honda needs to introduce a 1.0 litre vehicle i.e.
Brio, Life, Logo, Jazz/Fit etc otherwise it’s car plant will be closing down.
The growth in the auto sector in Pakistan is going to come from the 1.0 litre and sub 1.0 litre category – as the public aspires to move from 2 wheels to 4 wheels. A basic SWOT analysis would have revealed this to any of the big 3 manufacturers.
3. Indus is in a slightly better position than Honda Atlas as they have finally taken their gloves off and are actually going to compete directly with the Honda (City) with the imminent introduction of the Yaris
sedan, but the market volumes are very limited due to current pricing levels. IMC also needs to introduce a small 1.0 litre hatchback i.e. previous gen Aygo / Yaris hatchback etc, IMC has a lot of choice – even from the Daihatsu back catalogue.
Ultimately the big 3 have themselves to blame for the current mess, as they never actually competed against each other but allocated each sector of the auto market between themselves – acting as a cartel and took advantage of the public. This was the reason for the introduction of the Government’s Auto Policy and they should have anticipated what was coming.
The constant excuse of Rupee depreciation is no longer acceptable – as the largest cost component of a vehicle is the engine, however as long as engines are imported from Japan / China / or any other SE Asian country you will always be susceptible to currency fluctuations.
It’s embarrassing and shameful that Pakistan is still not able to manufacture an indigenous car
engine to international standards – so much for technology transfer…
The encouraging news is the new entrants – the Kia Picanto is a good option, but needs to be priced a bit more competitively and it’s also good to see the United Bravo and Prince Pearl – although both need to improve their quality and features, but it’s early days and they will get better. Overall it’s great to see that the public now has more choice.
Al Haj /FAW started off quite well (pricing and features) but recently seemed to have lost their way a bit –the V2 needs a refresh and the option of a 1.0 litre engine to get them back on track.
The spanner in the works (no pun intended) is hybrids and electrification. The developed countries are rapidly moving to hybrid engines and full plug-in electric vehicles . This will have an impact on the demand for oil – many are of the view that global oil consumption has reached “peak oil”.
One can never predict the price of oil due to various global factors, however, if oil producing countries see demand reducing in the developed countries they may increase prices to compensate, conversely if
demand curtails, then there may be a glut and the oil price will drop. Either way, the fluctuation in oil price will be felt more greatly by developing countries as they will be the last to move to hybrids and full electric cars. Pakistan and other developing countries can barely generate enough energy to power their homes and businesses and will not be able to meet the demand from full electric cars (plug-ins) for some time.
However, Pakistan has plenty of sunshine and solar energy, so maybe in the future the solar panels on the roof of your home will be used to charge your electric vehicle?
It will be interesting to see how the auto sector in Pakistan develops over the next decade.