Boston, MA -- (ReleaseWire) -- 01/03/2014 -- Vehicle production figures from the Pakistan Automotive Manufacturers Association (PAMA) in September 2013 came in at 10,767 units, an increase of 3.3% year-on-year (y-o-y). However, auto production for the first three months of FY13/14 (July-June) actually declined 4.1% y-o-y, to 32,690 units.
Although vehicle sales have shown signs of a recovery since the beginning of the fiscal year, growing some 7.7% y-o-y, to 33,424 units in the first three months of FY2013/14, auto production is still struggling to gain traction, bearing out our previous forecasts.
According to the PAMA, passenger car sales for September 2013 rose 13.9% y-o-y, to 9,659 units, bringing sales for the first three months of FY13/14 to 28,539 units, a gain of 6.5% y-o-y. We previously forecast that car sales will begin to recover in FY13/14 after their disappointing performance in FY2012/13, when they declined 24.5%, and latest figures confirm our view.
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However, we see some headwinds for car sales. The shortage of vehicles in the small car segment, due to the lack of affordable locally assembled models, may force the government to revisit its policy of limiting the age of used imported cars, which would then hurt sales of domestic automakers once more. That said, we remain cautiously optimistic and expect a mild recovery in passenger car sales for FY2013/14. As such, we are maintaining our car sales growth forecast for FY13/14 at 3.0%, to 122,395 units.
The commercial vehicle segment also registered strong percentage growth in September, of 27.5% y-o-y, to 1,743 units, bringing sales for the first three months of FY13/14 to 4,885 units, an increase of 15.9% y-o-y. While we have upgraded our FY13/14 CV sales growth forecast to 1.0%, to 19,124 units from a fall of 1.0% previously, sales in absolute numbers are still small.
We caution against interpreting the sales growth print as a sign that investment is picking up on the back of a strong economy. To highlight the still anaemic market demand, CV sales in FY2007/08 and FY2008/09 were 44,215 units and 29,317 units respectively. Our Country Risk team recently downgraded its FY2013/14 GDP growth forecast from 4.0% to 3.4% as the economy undergoes a painful but necessary rebalancing. The fiscal retrenchment from the public sector as well as the mediocre 1.5% growth in gross fixed capital formation forecast by BMI for FY2013/14 is likely to keep a lid on CV demand and keep absolute CV sales low in the interim.
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