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Cut in leasing rates pushes car sales up

KARACHI (December 30 2002) : Leading car producers in Pakistan are all set to earn good profits in the current year mainly on account of huge growth in car sales after commercial banks, leasing companies and other institutions slashed their leasing rates to as low as 12 percent.

Ample liquidity with Pakistanis after September 11 events with limited investment options is also one of the major factors behind rising car sales.

According to latest figures, the car sales has jumped by around 30 percent in the first five month of fiscal 2002-03 surpassing the mark of 21,000 cars.

Analysts believe that during 2002-03, the car sales in Pakistan can cross the level of 50,000 cars for the first time in history.

In the last fiscal, around 42,000 cars were sold in Pakistan.

The Pak Suzuki's 'Alto' and the Indus Motors new model 'Corolla' are being sold as hot-cakes these days.

Recently, the Indus Motors have informed that it will double the production by February 2003 thereby further boosting its revenue and profitability.

Analysts believe that the Pak Suzuki after incurring a loss two years back is all set to show record profits for the year ending December 2002.

The Suzuki company's revenue is expected to reach Rs 11 billion in 2002.

Similarly, the Indus Motors whose 'Toyota Corolla' is in high demand will book record profits in the current year. The 'Honda Atlas' cars that posted more than 100 percent increase in its profits in 2001-02 will again show good growth in the current year.

The new-year is expected to bring more pleasure for the local car producers.

The declining interest rates and the stronger local currency bodes well for their overall financial health, said industry experts.

A statistics compiled by the Pakistan Automotive Manufacturers reveals an increase of 23 percent in car sales, 23 percent in motorcycles, 92 percent in trucks, 28 percent in LCVs and bus sales grew by 48 percent.

According to a report of Adil Khan of AKD Securities leasing companies and banks are playing an important role in boosting automobiles demand. About 40 percent of the new car sales are now financed by these entities.

Due to reduce interest rates, leasing and financing options are becoming increasingly attractive to buyers and perhaps more importantly to loan-providers.

Another important development in automobile financing are increasing interest-free car financing schemes based on Islamic financing mode of Ijarah or Islamic leasing, which should positively impact demand from interest-averse individuals.

He said since the automobile industry is heavily dependent on imported raw materials, the stronger rupee should reduce the cost of production, feeding into the gross margins, adding the changing demographics of Pakistan like urbanisation and increased proportion of population in the range of 22-28 years is also contributing towards the increased demand for transport.

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