Karachi: Pakistan's auto industry is poised for significant profitability growth, with a projected 52% year-over-year increase in the fourth quarter of fiscal year 2026, reaching Rs18.4 billion, according to recent data. This surge is primarily attributed to a substantial 30% rise in vehicle volumes and an enhanced sales mix that includes new models.
According to JS Global, the industry's quarterly earnings are also expected to climb by 7%, driven by the increased sales of Sazgar Engineering's TANK 500 model, which commenced deliveries this quarter. Sazgar Engineering reported a remarkable 2.3 times year-over-year and 21% quarter-over-quarter increase in units sold, totaling 6,549 units in the fourth quarter.
Net sales for the Topline Auto Universe are anticipated to rise 38% year-over-year and 8% quarter-over-quarter, reaching Rs188 billion. This growth is largely due to higher sales volumes and an improved sales mix, with a significant contribution from the higher-priced Fortuner and the introduction of the new TANK model. Overall, volumes across the Topline Universe increased by 30% year-over-year and 2% quarter-over-quarter, totaling 31,584 units in the fourth quarter.
Gross margins for the industry are expected to reach 20.2% in the fourth quarter, up from 18.08% the previous year, although slightly down from 21.94% in the prior quarter. The quarterly compression in gross margins is attributed to a higher share of lower-margin variants and cost pressures. However, the year-over-year rise is led by Millat Tractors Limited (MTL), whose margins have improved following consolidation.
Other income for the Topline Auto Universe is likely to be Rs4.7 billion, showing a 9% year-over-year decrease but a 4% quarter-over-quarter increase. The effective tax rate for the industry is projected to be 37.02% in the fourth quarter, a significant rise from 14.17% the previous year.
Several individual companies also demonstrated notable performance. Atlas Honda Limited continues to lead the 2-wheeler segment with a 29% year-over-year increase in sales, reaching 465,212 units in the first quarter of the manufacturing year 2027. Indus Motor Company is expected to see a modest earnings rise of 6% year-over-year and 2% quarter-over-quarter, while Honda Atlas Car projects a 12% year-over-year increase in earnings per share.
Sazgar Engineering Works anticipates a 2.2 times year-over-year earnings increase, attributed to strong sales of the new TANK 500 model. Millat Tractors Limited expects earnings to rise 2.3 times year-over-year, benefiting from improved gross margins and strategic cost optimizations.
Overall, the Pakistani auto industry appears to be on a growth trajectory, driven by innovative product offerings and strategic market positioning.