New Transportation market report from Business Monitor International: "Pakistan Autos Report Q4 2013"
Boston, MA -- (SBWIRE) -- 09/25/2013 -- BMI remains cautious on the near-term outlook for new car sales in Pakistan in 2013, with a variety of negative factors informing our view. However, the longer-term picture holds more promise.
To look at the near-term outlook first, we believe that the budget for FY2013/14 is unlikely to provide any support to auto sales, which remain mired in a downtrend due to weak demand. Overall, we believe that the budget can be broadly seen as a mixed bag. It outlines a broad trajectory of fiscal consolidation for the next fiscal year and includes austerity measures, which we believe will continue to pose downward pressure on auto sales in the short term.
With the exception of operational vehicles utilised by enforcement agencies and critical development projects, no new cars will be purchased by the government for the next fiscal year. This will be negative for passenger car sales and pose an overall drag on vehicle sales for FY2013/14.
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The car industry also faces an ill-timed increase in prices due to future rises in general sales tax (GST), withholding tax and federal excise duty on local cars. Locally manufactured cars already suffer from a lack of demand due to their high costs of production, which translates into high sticker prices. That said, price increases will be in the tolerable range of 2-4% and should be mitigated by cheaper financing options due to falling interest rates and the weaker Japanese yen.
However, when the longer-term picture is considered, there are reasons for more cautious optimism. The FY13/14 budget aims to revive private sector investment and increase fixed capital formation growth in the medium- to long term, which we believe could prove beneficial for commercial vehicle (CV) manufacturers.
Further long-term support for the auto industry comes from the government's plan to introduce a 25%, 50% and 100% rebate on hybrid vehicles above 1,800cc, 1,201-1,800cc and up to 1,200cc respectively. As there remains a dearth of small engine hybrids in the country at present, BMI only expects the positive impact of this rebate to be translated after 2014, when Ruba SEZ Group, one of Pakistan's biggest investors, introduces a 800cc hybrid car in the market.
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