The Pakistani automotive industry is currently at an interesting spot, having seen more newcomers this year than it has in a long time. Experts foresee a sixty percent rise in the sales of cars in the financial year (FY) 2021, which includes the sales of the new entrants.
According to a senior research analyst at Topline Securities Limited, Syed Fawad Basir, the “faster than expected economic recovery” and “low interest rates” shall be the two key drivers of the increase in sales of vehicles across the country.
“After taking into account the higher-than-expected unit sales in the first four months (July-Oct) of FY21 and an upward revision in margin assumptions, we are revising our earnings forecasts for the Pakistani automobiles universe for the next two years by up to fifty-three percent,” Basir said.
“We are raising our earlier FY 21 and FY 22 auto car and light commercial vehicle sales assumptions by nineteen percent (to 201,000 units) and five percent (to 228,000 units), respectively,” he added.
Details shared by the State Bank of Pakistan (SBP) reveal that automobile loans increased from Rs. 251 billion in March 2020 to Rs. 270 billion in October, depicting an increase of eight percent. However, as reported by Basir, the sales will still be forty percent less than the highest level Pakistan has ever reached in FY18 when auto sales were at 329,000 units.
Basir further stated that Toyota Indus Motor Company Limited (IMC) is likely to experience a four to fifteen percent growth in earnings during FY21-FY22, largely due to the success of the new Yaris.
He added that Honda Atlas Cars (HCAR) will probably see an increase of three to fifty-three percent in earnings, mainly due to a higher than expected result in the 1st half of FY 2020-21, coupled with an upward revision of the combined industry estimates.
Basir also forecasted that the sales of Pak Suzuki Motor Company Limited (PSMC) will rise at a steady pace owing to the increased operational costs that came with the introduction of new models when the economy was struggling.
The auto industry is in for a major paradigm shift as there are numerous new entrants waiting for the opportunity to grab the lion’s share in the car market. Although it is too early to make any assumptions, it is safe to say that 2021 will be a very interesting year for the auto industry.