- Analysts attribute the dent in sales to tightened financing by banks and increased prices
Staff Report
KARACHI: Car sales for first half (July-December) of 2007-08 stood at 69,958 units, showing a decline of 7.7 percent when compared to 75,769 units sold in same period of 2006-07.
Moreover, on monthly basis, sales have declined by a massive 37 percent. Only 7,143 units were sold in December 2007 versus 11,361 units in November 2007.
Pakistan Automotive Manufacturing Association (PAMA) released figures for the local car sales in December 2007.
The main reason behind this decline in sales can be attributed to fewer working days during the month of December 2007 on account of Eid holidays and political turmoil after Ms Bhutto’s assassination, said Bilal Hameed, an Analyst at JS Research.
Moreover, price hike following new tax levy and curtailment of auto financing by some banks can also be another contributing factor, he added.
Combined sales of LCVs (Light Commercial Vehicles) and cars in 1HFY08 declined by 3.7 percent to 88,902 units versus 92,332 units in corresponding period of last year.
Meanwhile, a research report written by Analysts at Arif Habib Securities stated that automobile production by the four major industry players declined by 3.4 percent during the first half of the current fiscal year.
The sales of Pak Suzuki, Indus Motors, Honda Cars, and Dewan Motors combined fell to 88,087 units from 91,175 units in the same period of last financial year, the report said. However, production rose by 0.4 percent from 93,483 units to 93,880 units.
The Arif Habib Analysts said the sales fell in December due to fewer working days on account of days off due to Eid-ul-Azha and closure of businesses following the assassination of Benazir Bhutto.
They said that higher interest rates and unit prices for this period as compared to last year had also been responsible for dent in sales.
Besides, stringent checks by major banks due to credit default has also affected car financing negatively, they added. Moreover, the production was also low in December due to maintenance work (an annual or bi-annual procedure of auto assemblers).
Maintenance work hampered production activities for assemblers in December. Production shall be back in full swing by the end of January. “We expect the sales to remain low till elections are held and political stability is established in the country,” said the Arif Habib Analysts.
Yawar Mustafa, an Analyst at Capital One Equities, said, “We believe the reason for the decline in sales is tightened car financing by banks in large, coupled with political uncertainty and business shutdown in the country.”