Pakistan September. Sales down for the 9th month in a row

Pakistan Motorcycles

Pakistani Motorcycles Industry dropped for the 9th month in a row in September losing 23.9% with year to date figures down over 14% due to the increased tax on the sector, the currency deterioration and vehicles price increase. However, the market stands as the sixth biggest market in the World.

 

Economic Environment

Pakistani economy likely remained depressed in the first quarter of the fiscal year 2020, after stumbling in FY 2019, which ended in June. In July, large-scale manufacturing output contracted year-on-year due to declining coke and petroleum products, and automobile production, while credit conditions deteriorated markedly in the same month on previous monetary tightening. Moreover, in Q1, cash remittances decreased year-on-year and inflation accelerated, which boded poorly for household spending. In other news, the IMF concluded its Article IV visit on 20 September.

Economic growth is projected to be lethargic in the fiscal year ending June 2020. A more austere fiscal stance and economic reforms to narrow gaping fiscal and current account deficits will likely hamper short-term growth prospects. Low international reserves, ballooning public debt and tensions with neighboring India present downside risks to the outlook.

 

Market Trend

In a such not positive economic environment and following years of rolling growth, the country’ main industry – the two-wheeler – has declining inexorably.

Indeed, according to data released by the Pakistan Association of Automotive Manufacturers, in the first three months of the 2019 the market has shown discontinuity with the previous trend, breaking the growth after years of records.  Total sales (including both motorcycles/scooters and three-wheeler/rickshaw) have been 425.672, down 12.4% from the correspondent quarter last year, which was the all time record. The already negative trend reported in the first two months, was further deteriorated in March when sales dropped 18.3%.

The trend unchanged in the second quarter, despite the fall moderated, with April sales at 155.215 (-12.3%), May at 154.782 (-8.5%) and June at 142.735 (-9.7%) ending the first half 2019 with 872.000 sales, down 11.9%.

In the Q3 (which is the start of local fiscal year) the trend was even more negative with sales in July at 113.096 units (-25.1%), in August at 128.419 (-8.5%) and in September at 126.141 (-23.9%) with year to date figures at 1.24 million (-14.3%).

Before 2004, nobody could ever think, Pakistan motorcycle industry could flourish at such an exorbitant scale. In those years the market volume was below 0.1 million annual units and there were only two companies,Atlas Honda and Dawood Yamaha,operating in the market. Suzuki and Qingqi had very small share.

Thanks to a government open policy, new manufacturers entered the market backed by Chinese technology, and the sector become crucial to sustain the economic development of Pakistan in the last 15 years, becoming – by far – the first solution for individual mobility. 

The following factors played a vital role in this development.

  • Cheap but reliable technology from China.
  • Independent sourcing of technology i.e Engines from China and Body parts from local vendors.
  • Assemblers of Japanese brands had to pay a big amount as royalty to their principals, while new assemblers are sourcing everything independently. It has reduced bike cost.
  • Overhead expenses are small as most of the companies operate in limited areas.
  • Financing/leasing facility is available at local level. This facilitated lower-income people to buy a bike despite limited resources.

In recent years, Pakistani motorcycles industry has been among the fastest in the World. Indeed, the milestone of 1 million units has been hit for the first time only in the 2015 and now the market is already running towards the 2 million annual sales. Following the over 1.4 million sales achieved in the 2017, the market further boomed in the 2018, with a record of 1.900.382 sales. up 6.6%, and scoring the new All Time Record.

However, the depreciation of rupee, the tax increase and less cash available for credit, penalized the market since the end of 2018, with motorcycles price further increasing discouraging the demand and the market has taken a negative path.

Pakistan Motorcycles
DYL Junoon

Best selling Brands

As far as regard the competitive landscape, all competitors are producing locally and just a reduced number of manufacturer are fighting in the market, with local brands (DYL, Sohab, United Auto, Sazgar, Road Prince, Hero Motor (a Pakistan company) Ravi) Japanese (Honda, Suzuki and Yamaha) and Chinese (Qingqi).

The most of the demand is concentrated on motorbikes in the 125-150 cc range quite flexible for the local unpaved roads and affordable for people with a still limited purchase power. Premium brands are not yt landed here as the scooter manufacturers, because their segment are negligible. Even Japanese are locally producing low displacement-low cost models and not importing their top class models.

Market leader is Honda with over 60% of market share and 2018 sales at 1.15 million units (+10.8%) with the CB 150F as best model. 

In second place there is the local brand United Auto with 431.517 sales (+16.0%) and in third Road Prince with sales at 207.485 (-11.2%).

This article was written with the contribution of Mr. Imtiaz Ahmad, a Motorcycles professional living in Pakistan.

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