Islamabad, Pakistan's automotive sector is witnessing a remarkable recovery in February 2024, with an 81% year-on-year increase in sales among three leading listed companies: Pak Suzuki Motor Company Limited (PSMC), Honda Atlas Cars (HCAR), and Indus Motor Company (INDU). This surge in sales marks a significant turnaround after 19 months of continuous decline. The anticipated sales volume for February is 8,000 units, contributing to a total of 50,000 units in the first eight months of the fiscal year 2024, thereby reducing the year-on-year decline to 45%.
According to JS Global, the revival in auto sales is driven by several factors, including an expected monetary easing cycle, improved agricultural income, and strategic purchasing ahead of elections. Pak Suzuki Motor Company Limited is projected to lead the growth with a substantial recovery in sales, particularly for its low-end passenger cars such as the Alto. Indus Motor Company is also expected to report an 11% increase in sales, buoyed by the popularity of its models Corolla, Yaris, and the newly launched Toyota Cross. The report attributes the positive growth to a low base effect resulting from plant shutdowns in February of the previous year. Meanwhile, Honda Atlas Cars is anticipated to continue its month-on-month sales recovery.
The report highlights the improved agricultural income due to a better cotton crop and pre-election buying as key drivers of the sales pickup in January and February 2024. The major boost in demand from reduced inflationary pressures is yet to fully impact the market, suggesting potential for further sustainable growth.
The automotive sector began the third quarter of fiscal year 2024 with hopeful signs of recovery. January 2024 sales were down by only 6% year-on-year, a significant improvement from the steep declines observed in the previous 18 months. Indus Motor Company recently announced a temporary plant shutdown due to supply-side issues, indicating ongoing challenges despite the positive trends.
The report further discusses the broader economic context affecting the auto industry, including high interest rates that have dampened auto financing attractiveness and currency depreciation leading to increased car prices. However, the expected monetary easing and resulting pickup in auto financing are anticipated to contribute to a more sustained recovery in auto demand, particularly in the second half of the calendar year 2024.