In 2024, Pakistan’s automotive sector has experienced significant turbulence, largely driven by economic challenges and shifts in consumer demand. September 2024 saw a sharp decline in overall automotive sales, with tractor sales plummeting by 80% year-over-year (YoY). However, certain segments, particularly low-capacity passenger vehicles and light commercial vehicles (LCVs), saw a notable resurgence.
This article delves into the key trends shaping the sector, analyzing various segments and their performance, while also exploring the market dynamics affecting major original equipment manufacturers (OEMs).
Industry Performance in September 2024
The automotive industry reported a significant decline in sales volumes in September 2024, with total sales dropping 16% YoY to 11,692 units. This reduction is primarily attributed to a sharp 80% YoY decline in tractor sales, reflecting decreased agricultural activity and lower farmer income. On the other hand, LCVs and Pickups exhibited robust growth, surging by 32% YoY, indicating a shift in consumer preferences towards more affordable and versatile vehicle options.
Passenger cars with engine capacities of 800cc and below were the top-performing segment, registering a 35% YoY increase in sales, totaling 3,761 units. In contrast, sales in the 800-1000cc segment plummeted by 65% YoY, with the Suzuki Cultus experiencing a particularly sharp drop in demand.
Key statistics from September 2024:
- Total industry sales: 11,692 units (16% decline YoY)
- Passenger cars (800cc & below): 3,761 units (35% increase YoY)
- LCVs & Pickups: 2,503 units (32% increase YoY)
- Tractor sales: 1,076 units (80% decline YoY)
OEM Performance and Market Share
Among the leading OEMs, Toyota Indus Motor Company (INDU) emerged as a standout performer, registering a 48% YoY increase in sales. This growth was primarily driven by the success of the Corolla, Yaris, and Cross models, which together accounted for 1,883 units in September 2024—a 79% YoY increase. Conversely, the company’s Fortuner and IMVs models saw a slight decline of 11% YoY.
Honda Atlas Cars (HCAR) reported a 5% YoY decrease in overall sales, with the Civic and City models witnessing marginal declines. However, Honda’s BR-V and HR-V models saw a more pronounced drop, with sales declining by 31% YoY.
Pak Suzuki Motor Company (PSMC), another major player, reported an 18% YoY increase in sales, with strong demand for the Swift, Alto, and Ravi models. The Alto, in particular, registered a 23% YoY growth, while the Bolan saw a massive 169% YoY surge in sales.
OEM performance highlights:
- Toyota (INDU): 2,367 units sold (48% YoY growth)
- Corolla, Yaris & Cross: 1,883 units (79% YoY growth)
- Fortuner & IMVs: 484 units (11% YoY decline)
- Honda (HCAR): 1,269 units sold (5% YoY decline)
- Civic & City: 1,143 units (1% YoY decline)
- BR-V & HR-V: 126 units (31% YoY decline)
- Suzuki (PSMC): 5,013 units sold (18% YoY growth)
- Alto: 3,146 units (23% YoY growth)
- Bolan: 615 units (169% YoY growth)
Tractors: A Sector in Crisis
The sharp decline in tractor sales, down 80% YoY in September 2024, has been a key contributor to the overall industry downturn. A combination of factors has led to this drop, including a slowdown in agricultural activity, reduced farmer income due to declining crop prices, and the anticipation of the Green Tractors scheme, which has caused many farmers to defer purchases. Additionally, the imposition of a 10% sales tax on tractors has further exacerbated the situation, making these essential vehicles less affordable for farmers.
Passenger Cars and LCVs: A Ray of Hope
While the tractor segment struggles, the passenger car and LCV sectors have shown some resilience. Passenger car sales increased by 22% YoY in September, with the 800cc and below category leading the charge. Similarly, LCVs and Pickups posted impressive gains, driven by the performance of PSMC’s Bolan and Ravi models, which saw sales rise by 169% and 57% YoY, respectively.
Outlook for FY25
Looking ahead, the overall outlook for the automotive industry in FY25 remains cautiously optimistic. AKD Securities forecasts a 10% YoY increase in passenger car and LCV sales, driven by anticipated GDP growth of 2.8% and potential reductions in vehicle prices. Lower auto financing rates, combined with the possibility of OEMs offering interest-free installment plans, could further stimulate demand. However, challenges remain, particularly for the tractor segment, which is expected to take time to recover from the current downturn.
Despite these challenges, Toyota Indus Motor Company (INDU) remains the preferred pick for investors, with a projected target price of PKR 2,100/share by June 2025, offering a potential upside of 21%. The company’s strong balance sheet and consistent earnings growth make it a solid choice in a volatile market.
Conclusion
Pakistan’s automotive sector is in a state of flux, with contrasting performances across different segments. While the tractor industry faces significant challenges, the growth in passenger cars and LCVs offers a glimmer of hope for recovery. As the industry navigates these turbulent times, a combination of government policy, market conditions, and consumer preferences will play a crucial role in shaping the future of the sector.