Despite Recession the Auto Industry is Still Thriving

PTH report

Below is an interesting article from Dawn about the increase in the sale of cars during the past six months. The article quotes that during the past six months Pakistanis spent around Rs. 60 billion on the purchase of motor vehicles. The interesting thing is that in the past Pakistan’s car buying spree used to be backed by high availability of consumer credit at low interest rates. However, after a hike in interest rates and rising NPLs (Non Performing Loans), the consumer credit bubble has been burst and now banks have become very selective in giving auto loans. The current surge of buying has chiefly been cash based.

While it is a good indicator showing that the auto industry has largely been insulated from the economic downturn but at the same time it also underlines the fact that wealth distribution in Pakistan is highly skewed towards rich. It also shows that negative effects of economic downturn are disproportionately shared by the poor.
Here is the link to the article

Rs60bn exhausted on buying new cars in six months

From the Newspaper
January 13, 2011 (4 days ago)

By Aamir Shafaat Khan

Car analysts believe that the heavy sales show that a small group of buyers is keeping the car and its vendor industry thriving. —

KARACHI: Pakistanis spent as much as Rs48 to Rs60 billion over the last six months on the purchase of new cars despite high prices, uncertain political and economic situation, poor law and order, flood devastations, surging food inflation and high utility costs etc.

There had been 11.34 per cent rise in overall car sales in July-December 2010 to 59,648 units as compared to 53,565 units in corresponding period of 2009. Average monthly car sales was estimated at 10,000 units worth Rs8 to Rs10 billion.

Car analysts believe that the heavy sales show that a small group of buyers is keeping the car and its vendor industry thriving.

The share of rural buying is estimated at 30-40 per cent of total sales as growers after harvesting good crops usually go wild for new cars. They also pay heavy premiums to the car dealers on spot buying.

The corporate sector and rich class change cars almost every year.

A total of 18,717 Toyota Corolla cars were sold in July-December 2010 showing an average monthly sale of 3,119 units in which Corolla Xli and Gli hold major share having price tag of Rs1.33 to Rs1.46 million.

A total of 11,591 Suzuki Mehran were sold during the period under review reflecting monthly sale of 1,931 units. The price of Mehran models ranges from Rs453,000 to Rs550,000.

Sales of Suzuki Cultus stood at 5,599 units in July-December with monthly sale of 933 units. The price of different Cultus models starts from Rs850,000 to Rs891,000.

Suzuki`s Alto average monthly sales in July-December were 960 units and its price of various models hovered between Rs656,000 to Rs705,000. A total of 6,483 units of Bolan were sold in the period under review making a monthly sale of 1,080 units. Its various models are available at Rs532,000-Rs645,000.

An average 659 units of Honda City were sold every month during July-December 2010. Its different models are available at Rs1.31 million to Rs1.44 million.

Honda Civic price hovers between Rs1.6 to Rs1.92 million and its monthly sales in the last six months were 486 units.

As the share of auto financing by the banks has fallen to 20-25 per cent after rising interest rates to 17-19 per cent, around 70 per cent of cars were now sold on cash basis.

From January 2009 to December 2010, Pak Suzuki Motor Company Limited (PSMCL) had raised prices of different models by one to six per cent.

Similarly, Indus Motor Company (IMC), the maker of Toyota Corolla and Daihatsu cars and Honda Atlas Cars, had raised the prices by three to nine per cent and three to five per cent in the same period.

The industry believes that the reason of cost escalation was because of rising yen and other currencies against the rupee. Yen`s value had risen by 22 per cent from 0.8434 in June 2009 to 1.0277 in December 2010.

Gas rate was Rs339.43 in June 2009 as compared to Rs382.37 per MMBTU in December 2010. Power rate had risen to Rs12.37 per kwh in December 2010 from Rs8.22. Steel price soared to $736 per ton in December 2010 from $586 per ton in June 2009.

Polypropylene, aluminum, copper and lead prices had swelled to $1,310, $2,350, $9,146 and $2,411 per ton in December 2010 as compared to $865, $1,573, $5,012 and $1,673 per ton in June 2009.

http://www.dawn.com/2011/01/13/rs60bn-exhausted-on-buying-new-cars-in-six-months.html




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