Vehicle Sales Fall by 36% in July 2024 Amid Post-Tax Decline

Pakistan’s automobile sector witnessed a sharp decline in car sales for July 2024, with a 36% month-over-month (MoM) drop, largely attributed to pre-buying activities in June 2024. According to data from PAMA (Pakistan Automotive Manufacturers Association), 8,589 units were sold in July, marking a 60% year-over-year (YoY) increase but reflecting a significant decrease from the 13,284 units sold in June 2024. The month-over-month (MoM) decline in car sales can be traced back to the increased tax rates for vehicles, specifically the withholding tax (WHT) introduced in the FY25 budget. This led to a surge in car purchases in June as buyers rushed to avoid the new tax impositions, resulting in a substantial sales drop in July when demand naturally slowed down. Hyundai Nishat Motor experienced the most severe MoM drop, with sales plunging by 50% to 529 units. Despite this, the company still recorded a 7% YoY growth. Toyota Indus Motor Company (INDU) also saw a considerable MoM decline, with sales falling by 44% to 1,664 units. Honda Atlas Cars (HCAR) reported a 15% MoM decline, selling 931 units, while Sazgar Engineering (SAZEW) managed to limit its decline to 5% with 825 units sold. Interestingly, the YoY increase in July car sales is partially due to the low base effect of the industry in 2023, when plant closures and inventory shortages stifled sales. However, the July 2024 figures reflect the normalization of these factors and the impact of new tax regulations. In the two-wheeler and three-wheeler segments, the market saw a 5% MoM decrease, selling 84,993 units in July 2024. Atlas Honda (ATLH) led the segment with 70,255 units sold, marking a 12% MoM decline but a 13% YoY increase. Pak Suzuki Motors Company (PSMC) and Sazgar Engineering (SAZEW) also recorded minor declines of 1% and 11% MoM, respectively. The tractor segment was hit the hardest, with Millat Tractors (MTL) sales plummeting by 63% YoY and 78% MoM to just 605 units. Al-Ghazi Tractors (AGTL) also faced significant declines, with sales down 16% YoY and 40% MoM, totaling 855 units in July 2024. The sharp drop in tractor sales was mainly due to the pre-buying in June ahead of the imposition of a 10% GST on tractor sales in July. On a positive note, the truck and bus sector saw a 3% MoM increase in sales, with 307 units sold in July 2024, representing a 57% YoY growth.