Pakistan's autos sector continues to underperform as end-FY09 (ending June 30) approaches, but as BMI points out in this report, some segments are showing signs of recovery. Although passenger car sales for the first 10 months of the fiscal year are still significantly lower than the same period in FY08, sales for the last three months achieved month-on-month (m-o-m) growth. However, year-to-date sales have been impacted by a particularly bad December, when only 2,689 cars were sold. As such, BMI has lowered its forecast to sales of 82,325, down by 50% year-on-year (y-o-y). Bus sales are performing in line with our previous forecast of a 45% decline, but the tractor segment has rebounded in the last two months, from sales of just 3,844 units in February to over 6,000 units in both March and April. BMI now expects the tractor segment to grow by 7% by end-FY09. In order to further support sales, the Federal Board of Revenue (FBR) has forwarded a proposal to the government recommending that it allows imports of cars over 10 years old. The report suggests that brands with local production facilities have a monopoly as imports of used cars are restricted to those of three years old or under. It adds that this gives the manufacturers the opportunity to hike prices, which is adversely impacting the market. There appears to be little advantage for the local manufacturers at present, however, as production remains almost 50% lower than the same period of FY08. Given the poor prospects in the short term, Pakistan brings up the rear in BMI's Business Environment Ratings for the Asia Pacific autos industry on 42.4 out of a possible 100. The market is held back by low production growth potential and an average rating for sales growth. However, as a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS) under the auspices of the WTO, the country's regulatory environment scores well. A number of free trade agreements also contribute to this criterion, although forming free trade agreements (FTAs) with non-Asian countries would improve this rating further. Despite low marks for bureaucracy and corruption, the market does score well for its long-term economic risk and policy continuity. Japanese manufacturers still control most of Pakistan's passenger car production and sales. Figures for FY08 show that Suzuki Motor-brand models represented 62% of total passenger car production and 51.7% of sales. The Suzuki Mehran also won back its place as Pakistan's best-selling model after losing out to the Toyota Corolla in the previous financial year. The Corolla struck back in the first 10 months of FY09, however, selling 20,626 units compared to 11,142 for the Mehran. Honda Motor, which ranks third for car sales, dominates the motorcycle segment with a market share of 70% in FY08, which rose to 72.5% for 10MFY09.
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