Karachi, June 07, 2022 (PPI-OT): Autos sales for May-2022 likely to hold ground
Auto sales for May-2022 are expected to clock in at 22,700 units, up 1.7% MoM (+45% YoY), taking cumulative sales for 11MFY22 to 249,304 units (+49% YoY).
We anticipate a declining trend in overall auto sales volume from here on (decline of 25% YoY during FY23) as the impact of interest rates, measures taken by the regulators to curb auto imports and cost led price hikes weigh in.
However, we project sector margins to be supported in the coming quarters, owing to the multiple rounds of price hikes announced during Mar to May-2022.
Muted growth in demand
Auto sales for May-2022 are expected to clock in at 22,700 units, similar to previous month’s levels. The stability comes after Apr-2022 sales reported 17% MoM decline. Cumulative growth for 11MFY22 is expected to compute to 49% YoY, reaching 249,304 units.
The stable volumes are likely to be driven by double-digit growth in HCAR, owing to higher demand shifting the sales mix back to lower priced/high volume Honda City, more than compensating for decline in other models. That said, HCAR sales are likely to be lower than sales reported in Mar-2022 (3,651 units), a trend witnessed by peers as well. INDU is anticipated to report single-digit growth, cushioned by higher demand for Yaris. Excluding Yaris sales, the company’s sales may witness a declining trend. Similarly, sales for PSMC are likely to decline by 5% MoM owing to the deteriorating purchasing power in the segment.
Margins and volume continue to face pressure
Despite some support coming from new model launches (Civic and Swift), we anticipate a declining trend in overall auto sales volume from here on (decline of 25% YoY during FY23) as the impact of interest rates, measures taken by the regulators to curb auto imports and cost led price hikes weigh in. While volumes may take a dip, we project sector margins to remain stable in the coming quarters. In an attempt to maintain margins, the steep PKR devaluation and surging freight rates have led auto manufacturers to announce multiple rounds of price hikes in the last six to seven months. While impact of price hikes announced in Nov-2021 have been reflected in 3QFY22, we expect the latter price hikes to support the sector’s 4QFY22 margins.