Auto sales in Pakistan hit a two year high, jumping 61% in July, 2011 to 17,563 units from 10,942 units in the same month of last year. Pak Suzuki Motor Company led the auto sales up with 116 percent rise to 11,997 units from 4,503 seen in the same period last year. This is in sharp contrast to a Reuters report of 16% decline in auto sales in July across the border in India.
Pak Suzuki Motor Company saw a jump in all models while Honda and Indus Motors witnessed a slowdown. The latest addition to the Suzuki family Swift sprinted 285 per cent to 751 units while Mehran surged 179 per cent to 3,650 units. Liana posted its best month in more than a year by selling 100 units.
For Toyota Corolla, the best selling car in fiscal 2011, sales declined 16 per cent but still sold 3,681 units. Toyota Corolla remained the market leader but only by a small margin as they sold only 31 more units than second-highest selling car Suzuki Mehran.
Earlier, Economic Survey of Pakistan 2010-2011 reported that the first 9 months of fiscal 2010-2011 saw production of television sets jump 28.6% and automobile production increase by 14.6%. From July 2010 to March 2011, production of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively. These figures confirm the return of Pakistanis' appetite for consumer durables after a significant drop from 2007-2008 to 2008-2009.
In a separate news story carried by Bloomberg, Swiss food giant Nestle's Pakistan subsidiary said its sales of consumer packaged goods rose 25% year-over-year. Engro Foods, a local Pakistani competitor of Nestle, reported its sales climbed 46 percent to 7 billion rupees in the last quarter.
Rising sales of consumer durables like cars and fast moving consumer goods (FMCG) represent a clear sign of the return of the middle class consumers who had pulled back since 2008. This improvement has been been aided by rising incomes in the rural areas stimulated by higher food and commodity prices. Fast moving consumer goods (FMCG) – or Consumer Packaged Goods (CPG) – are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as milk, juices, sodas, toiletries, and packaged grocery items.
Nestle Pakistan's chief Ian Donald summed up the rising demand for his company's products as follows: “It’s a common perception that China and India are much bigger in terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is the world's largest packaged food company.
Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released in 2010.
The ADB report on Asia's rising middle class confirms that Pakistan's middle class has grown to 40% of the population, significantly larger than the Indian middle class of about 25% of its population, and it has been growing faster than India's middle class.
Coming on the eve of Pakistan's Independence Day this Aug 14, the news of rising sales of cars and other consumer products could lead to more hiring and help revive Pakistan's economy which has been stagnant since 2008.
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The facts, as one has come to expect of your writings, are twisted beyond recognition.
One of the many reasons that the sales shot up in July is beacuse of the cut in sales tax. Hence the buying decisions were expectedly deffered untill the cuts.
Moreover, auto analysts such as Furqan Punjani have termed this spike in sales as an aberration and that the sales chart is expected to palateau out and register a a very humble growth rate of 5-10% in FY 12. Another point raised by Punjani was that the consistent rallies by the Yen against the Pak Ruppee - which is making the margins wafer thin.
" This is in sharp contrast to a Reuters report of 16% decline in auto sales in July across the border in India."
Auto analysts in India such as Abdul Majeed with PWC meanwhile have cited the hiking of key lending rates by the RBI as a chief factor hurting auto sales. The RBI has been hiked rates 11 times since 2010 - increasing the base rates of most banks by about 250 basis points.
This move has been designed to reign in inflation. And in India, the policy makes have managed to keep it in single digits as compared to inflation running riot in pakistan (refer to the inflation data in the same Pak Economic Survey that you have quoted).
Therefore - RBI's moves - and hence, dip in sales in India.
As much as it might not sit well with you, India is still head and shoulders above Pak. Despite macro eco headwinds - even pessimists peg indian growth at 7% for FY 12. With lower inflation and higher growth than pakistan - India is better positioned - one would say.
Ashmit: "Moreover, auto analysts such as Furqan Punjani have termed this spike in sales as an aberration and that the sales chart is expected to palateau out and register a a very humble growth rate of 5-10% in FY 12."
Before the July jump, Economic Survey of Pakistan reported that from July 2010 to March 2011, sales of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively, much higher than the pessimistic forecast from Punjani that you quote.
Nestle Pakistan's chief Ian Donald summed up the rising demand for his company's products as follows: “It’s a common perception that China and India are much bigger in terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is the world's largest packaged food company.
That's because pakistan does not have domestic companies in this space unlike India which has Amul,Parle Agro,Britannia,Mother Dairy etc
U think this is a happy/acceptable state of affairs?
"Economic Survey of Pakistan reported that from July 2010 to March 2011, sales of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively"
The data that you quote is irrelavent. It represents sales in 3 quarters of the previous fiscal. Punjani is estimating the growth in FY12.
Moreover, you appear to be mighty confused. In your write up - you quote the Survey for claiming that PRODUCTION of cars, LCVs and two and three wheelers shot by "6.4%, 20.5% and 12.6% respectively".
Whereas, in response to my comment you claim that SALES shot up by "16.4%, 20.5% and 12.6% respectively".
There's a mighty big difference between the two.
Ashmit:"The data that you quote is irrelavent. It represents sales in 3 quarters of the previous fiscal. Punjani is estimating the growth in FY12."
Pakistan auto sector has been in recovery mode after 2008 crash, and sales just hit a two-year high. I see nothing on the horizon to change the trajectory in the foreseeable future.
Ashmit: "you appear to be mighty confused. In your write up - you quote the Survey for claiming that PRODUCTION of cars, LCVs and two and three wheelers shot by "6.4%, 20.5% and 12.6% respectively"."
My response is based on historical data from BMI that shows production and sales of cars in Pakistan closely match with very little unsold inventory.
why not just focus on good news in Pakistan -- why feel the need to feel better by pointing out that India is down? Economies are very different -
Bari: "why not just focus on good news in Pakistan -- why feel the need to feel better by pointing out that India is down? Economies are very different"
You can ignore Indian data if you wish. But I think comparisons are inevitable so close to Aug 14, especially when reports come in about the same industry at about the same time from the two sides of the border.
Anon: "That's because pakistan does not have domestic companies in this space unlike India which has Amul,Parle Agro,Britannia,Mother Dairy etc"
Pakistani FMCG companies like Engro Foods, Haleeb Foods, Shezan, Tapal, Shan and others dominate the packaged food business in Pakistan, according to Euromonitor report. Here's an excerpt:
Although multinationals are paving the way for innovations and taking into account consumers’ demands by launching new products and advertising them heavily, it is usually the domestic companies which win the competitive battle in volume terms as they focus less on expensive and more conventional items which already have a consumer base. Nevertheless, multinationals carry strong brand names and target the higher class with premium products, thus taking their reasonable share in value terms.
Supermarkets/hypermarkets slowly gain share from traditional grocers
Supermarkets/hypermarkets is the most steadily growing distribution channel with a new player Hyperstar. As urbanisation is increasing, people tend to leave their families and live separately and therefore there is sometimes no housewife at home to be responsible for the purchase of fresh items close to home. Supermarkets/hypermarkets became more popular over the review period, being gradually considered more convenient as this channel can offer a wide selection of products in one place. Pakistanis are becoming more used to planning their meals for several days and supermarkets/hypermarkets work on offering as wide an assortment as possible. Nevertheless, traditional retail outlets such as independent and small grocery retailers continue to have a good name not just because of the lower unit prices offered but also because of their selection as most of them are specialised.
Positive growth both in retail value and volume
Further slow growth is predicted for packaged food, although the market is far unsaturated, consumers will have to wait until the economy is more stable and confident that prices are not going to peak further. This mainly concerns the middle class consumers who are new to packaged food. Because of this factor, manufacturers will focus on launching a wider selection of economy brands.
I don't get it. While all Pakistan newspapers are busy pointing the dire state of economic affairs of Pakistan, this blogger is suggesting that Pakistan is doing better than India. Does this person knows that Pakistan had to remove the restrictions on import of 5 year old cars. Because production is very low.
Already all the sectors Of Pakistan economy are failing. Pakistan is losing in textiles, manufacturing(if it had any), and no electricity. Even the army chief has cast a deep worry over economic situation. The blogger works with his eyes closed. rather than working on issues which some other blogs do(people should read changinguppakistan), this blogger just tries to prove that Pakistan is better. Maybe its time you opened ur eyes. (and if you really don't want to publish my comment, i am proved right)
Rahul: "While all Pakistan newspapers are busy pointing the dire state of economic affairs of Pakistan, this blogger is suggesting that Pakistan is doing better than India."
Everything I have posted is based on data reported by the same newspapers and news agencies that you refer to. Such news does not get a lot of play.
Let me quote Pakistani entrepreneur Monis Rahman who summed it up well when he recently told the Forbes magazine the following: “You tend to hear the worst 5% of the Pakistan story 95% of the time"
Rahul: Are you not contradicting yourself by referring to the papers and stating “that Pakistan had to remove the restrictions on import of 5 year old cars. Because production is very low”.
Look at it a logically - the production is low and cannot meet the demand thus supporting Mr Haq that the sales went up hence the removal of restriction to meet the demand.
Remittances from by overseas Pakistanis rose to $1,096.31 million in July, 2011-12,a 38.57% jump over $791.18 million during the same period of last fiscal year, according to a report in Daily Times:
This was the fifth consecutive month when Pakistani workers remitted over $1 billion. They had remitted an amount of $1,052.90 million, $1,030.43 million, $1,049.80 million and $1,104.56 million in March, April, May and June 2011 respectively.
The inflow of remittances in July, 2011 from Saudi Arabia, UAE, USA, UK, other GCC countries (including Bahrain, Kuwait, Qatar and Oman), and EU countries amounted to $291.83 million, $257.65 million, $194.87 million, $118.55 million, $116.45 million and $32.59 million respectively as compared with the inflow of $194.94 million, $177.03 million, $143.86 million, $85.57 million, $101.25 million and $23.85 million respectively in July, 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first month of current fiscal year (July FY12) amounted to $ 84.37 million as against $ 64.68 million received in the first month of last fiscal year (July FY11).
Earlier Pakistani workers had remitted a record amount of over $11.2 billion during the last fiscal year that ended on June 30, 2011.
It may be recalled that the State Bank of Pakistan, Ministry of Finance and Ministry of Overseas Pakistanis had undertaken a joint initiative called ‘Pakistan Remittance Initiative (PRI)’ with a view to facilitating the flow of remittances in the country through formal channels. This initiative has shown remarkable progress as the remittances through formal channels have beaten all previous records.
Isn't it the case that Car sales increase because govt. has overthrown the responsibility of providing public transport (including railway for national level traveling)?
Labor force data from the World Bank for 2007 indicates that 23% of Pakistan's labor force has had tertiary (college) education.
This compares with 61% in the United States, 32% in the UK, 20% in Malaysia, 33% in Singapore and 17% in Sri Lanka.
It has no data for India or China.
My name does not clarify my nationality - so let me be upfront. I am an Indian That does not however mean that I view my fellow brothers and sisters across the border as enemies.
I noted that is that in areas such as infant mortality, you quoted the total number of infants that die in India and said it is largest in the world (True) but did not state that the Infant Mortality Rate (IMR) which represents the number of childer who die before first year out of the total live births - is much lower than Pakistan.
Secondly, the quality of data that is collected from Pakistan - on which most of your article is based is not commented upon. WIth large swathes of the country not amenable to surveys due to the security situation and no census conducted since 1998, you have to question how representative are metrics on issues such as hunger, poverty and illiteracy. When its top cricketers age cannot be trusted (Shahid Afrid has confessed in a TV interview that his age was 2-3 years different from his official age and this was not uncommon in Pakistani cricketers), can the longevity number be trusted?
The section of William Darlymple's article that you quote focuses on India's weaknesses but you have conveniently omitted other areas that speak very warmly of its many strength and the progress. Half truths can sometimes be more misleading than lies.
You refer to the fact that Pakistanis give the most to charity but fail to mention that only 1% of Pakistani pays income tax and the tax to GDP ratio of Pakistan is one of the lowest in the world. If you combine the tax to GDP ratio plus charity as a total outlay that a Pakistani makes towards his society, would Pakistani numbers lead the world or lag them?
This is not to downplay many of Pakistan's real achievements. Neither do I seek to minimize your goal of highlighting Pakistani strengths - but does it always have to be done by comparing with India. Even there selecting only those metrics and articles where Pakistan fairs better?
I respect your intellect and patriotism but hope to see greater balance especially in your references to India.
Taxes were expected to be lowered in July for Pakistan and hence sales were deferred for the past couple of months making this growth rate unrepresentative. In India on the other hand, this was the month that Reserve Bank raised its prime interest rate depressing sales also making this month an anomaly.
If you consider the full year numbers, you would reach a different perspective.
Total cars sold in Pakistan in 2010 was 215,678 http://www.pakalumni.com/profiles/blogs/production-and-sales-of-cars-a
Total cars sold in India in 2010 was 2,5 million http://www.cartalk.in/f5/sales-report-of-cars-sold-in-india-during-2010-2011-a-159. Considering that India's population is 6.5 times that of Pakistan, these numbers indicate that the per capita sales of cars in India was almost double that of Pakistan.
When we take into account that the top 10 Indian cities have some form of mass public transport and this is absent in Pakistan, this shows that the need for personalized transport in Pakistan is grater than India yet actual sales are lower.
gp65:"but did not state that the Infant Mortality Rate (IMR) which represents the number of childer who die before first year out of the total live births - is much lower than Pakistan."
It was a Hindustan Times news story that I quoted verbatim.
gp65: "the quality of data that is collected from Pakistan - on which most of your article is based is not commented upon...."
The quality of data in Pakistan is in fact better than that in India and most other developing countries, given the fact that Pakistan has a fairly comprehensive biometric database of its citizens which India and most other countries don't have.
gp65: "WIth large swathes of the country not amenable to surveys due to the security situation and no census conducted since 1998, you have to question how representative are metrics on issues such as hunger, poverty and illiteracy."
Much larger swathes of India in North East, North West and Central Indian states are hit by major insurgencies and have become no-go areas for any state employees. You don't hear much about it because major Indian cities are not affected and therefore Indian media pay little or no attention to it.
gp65: "You refer to the fact that Pakistanis give the most to charity but fail to mention that only 1% of Pakistani pays income tax and the tax to GDP ratio of Pakistan is one of the lowest in the world."
It's clear that you are not a regular reader of my blog because you have missed on my posts on Pakistan's problem of widespread tax evasion.
rehmat: "Total cars sold in India in 2010 was 2,5 million"
Let's compare apples-to-apples. Total car sales volume in India in 2010 was 1.87 million units, according to the Wall Street Journal. Here's an excerpt from the WSJ story:
Sales climbed to 1.87 million cars from 1.43 million in 2009, the Society of Indian Automobile Manufacturers said Tuesday.
Total local vehicle sales in 2010 also rose 31% to 14.82 million from 11.32 million.
rehmat: "Total cars sold in Pakistan in 2010 was 215,678 http://www.pakalumni.com/profiles/blogs/production-and-sales-of-cars-a"
This is not the best year for Pakistan auto sales. Pakistan car sales are recovering from a severe downturn in 2009.
Thank you for being kind enough to respond to my comments. I would like to differ with some of your interpretation and opinions, if I may.
1. I provided a source that supplied the exact number of cars sold for every single model in 2010-2011. That number comes to around 2.5 milion. You provide an alternative source Wall Street Journal which has a generic article. I do not doubt the integrity of the Wall Street writer but it is possible that he was working off some outdated numbers or annualized one particular months numbers. Why should a generic number be considered a better source than another one which has the level of granularity I supplied?
2. Even if we assume that indeed the WSJ number is more accurate (a debateble point in itself), it stil indicates that car purchase is 35% higher in India compared to Pakistan and that too when most of the top 10 Indian cities have a masst transport system and fairly well developed surface transport options available for inter-city travels. In absence of these options, the need for personalized transport is greater and yet the purchase is lower.
3. Finally you pointed out that the 215000 number for 2010-11 that I pointed out for Pak annual sales was in fact recovering off a low base due to the significant drop off in 2009. If that is the case, why did you fail to point out in your article that the 61% number you were comparing was off a low base and also due to some deferred buying option due to the expectation of duty reduction? Reading your original articlae, a person would come to the conclusion that Pakistanis buy more cars than India when in fact the fact on the grounds paint a different pictures.
I greatly appreciate that all your statements are fact based and you always provide the sources. I also understand that no-one is truly unbiased. I am biased towards India and you towards Pakistan - so that is understandable. But I think it would definitely add to your credibility if you did not cherry-pick data that actually results in misleading conclusions.
rehmat: "I provided a source that supplied the exact number of cars sold for every single model in 2010-2011. That number comes to around 2.5 milion."
Your source is user-generated content posted by someone named Dhillon, not as reliable as data from the Society of Indian Automobile Manufacturers quoted by the Wall Street Journal.
rehmat: "top 10 Indian cities have a masst transport system and fairly well developed surface transport options available for inter-city travels."
Pakistani roads and road transport networks and systems are more advanced than India's as reported by many independent observers like Alastair Scrutton of Reuters and William Dalrymple in The Guardian. Even an Indian journalist Hindol Sengupta agrees with that, as do I.
If you ever get a chance,try a bus ride with Daewoo bus service and their local competitors running on Pakistani motorways all over Pakistan.
Reduction in taxes announced by the government helped car sales sprint 35% in the first two months of financial year 2011-12, according to a report in The Express Tribune:
Sales stood at 29,537 units from July to August 2011 against 21,833 units sold in the preceding year, according to data released by Pakistan Automotive Manufacturers Association on Monday.
The incentive given by the government in terms of removal of 2.5% special excise duty on imported and locally manufactured vehicles coupled with reduction in general sales tax to 16% from 17% were the core reasons for the growth, said Summit Capital analyst Sarfraz Abbasi.
Growth was primarily led by Pak Suzuki Motor Company as its sales rose by 67% to 18,301 units followed by Indus Motor by 6% to 8,829 units.
The biggest leap forward was seen in Suzuki Swift sales that tripled to 1,274 units against 421 units in the same period last year. Liana, under the domain of 1,300cc engine capacity and above, recorded 149% jump in its sales to 127 units in comparison with just 51 units sold in the same period last year.
Meanwhile, tractor sales dropped by a hefty 78% to 1,993 units on the back of higher input taxes and plant shutdowns during the period. Al-Ghazi Tractors’ production operation remained completely shut during August.
Moreover, car sales declined by 31% in August alone amid less working days due to Eid holidays and lower production on account of Ramazan.
Company-wise breakup shows that this time Indus Motor took the front seat to lead sales with an increase of 27% to 4,728 units compared with 3,360 units sold in the same period last year.
New variants launched by the company in 1,600cc segment and CNG vehicles introduced in the already established market acted as a catalyst in this growth.
Here's a news report on India's slowing car sales:
Passenger car sales in India grew at a scorching 30% in 2010-11 (April-March). But with rising interest rates on auto loans and a sharp rise in petrol prices, car sales this year have slowed down to a crawl.
In fact passenger car sales crashed 16% in July and 10% in August, according to data by Society of Indian Auto Manufacturers (SIAM). Strike at Maruti Suzuki’s plant in Manesar, which had hit output of one of its most selling cars, the Swift hatchback, has only added to the pressure on overall industry sales.
SIAM has already cut its growth forecast for car sales to 10-12% from earlier 16-18%. Last month it said it would further downgrade growth forecast for the full year.
Research firm Crisil painted a bleak picture earlier in the week, saying it expects "growth in passenger vehicles to decelerate sharply to 2-4% with domestic cars growing at a mere 0-3% as against earlier forecast of a growth of 8-10%."
Crisil said its latest downgrade was prompted by Rs 3 rise in petrol price and 25 basis points hike in interest rates by Reserve Bank of India in September.
Other analysts, like Nikhil Deshpande of Pinc Research and Sejal Jhunjhunwala of Way2Wealth Securities too agree that sentiments are not looking good this year, despite the ongoing festive season.
"Automakers had expected car sales to pickup in the festive season. But there were two conditions -- interest rate hike cycle would peak out and fuel prices wouldn’t rise. But there has been no respite on either front," Deshpande told moneycontrol.com
No wonder then the automakers are going all out to tempt customers now, with more offers this year than last year, in the hope that people will spend impulsively during Dassera-Diwali. Fiat India, for instance, is offering benefits up to Rs 1.30 lakh on its Linea sedan, and Rs 75,000 on the Punto hatchback. Fiat’s offer includes insurance at Rs 1, exchange benefits, gift cheque and free road side assistance for 50 months.
India leads the world in road accidents, according to WHO:
NEW DELHI: In a dubious distinction for the country, the World Health Organization has revealed in its first ever Global Status Report on Road Safety that more people die in road accidents in India than anywhere else in the world, including the more populous China.
The statistics for India are chilling. At least 13 people die every hour in road accidents in the country, the latest report of the National Crime Records Bureau reveals. In 2007, 1.14 lakh people in India lost their lives in road mishaps — that's significantly higher than the 2006 road death figures in China, 89,455.
Road deaths in India registered a sharp 6.1% rise between 2006 and 2007. However, road safety experts say the real numbers could be higher since many of these accident cases are not even reported. "There is no estimate of how many injured in road accidents die a few hours or days after the accident," points out Rohit Baluja, member of the UN Road Safety Collaboration and Commission of Global Road Safety representing Asia.
The report, based on 2006 and 2007 statistics collected from 178 participating countries, said globally over 1.2 million people die in road accidents every year and 20-25 million people suffer non-fatal injuries.
Baluja said both central and state governments, while pushing for construction of more highways and roads, were doing precious little to make them safe. "We don't have scientific traffic engineering which forms the basis of road safety improvement practised in US and UK since 1930s. This still remains a matter of consultancy in India as we are yet to have our own traffic engineering wings," Baluja adds.
In fact, the report shows while only 3,298 people died in road accidents in UK in 2006, the figure, at 42,642, was much higher in the US.
The report pointed to speeding, drinking-driving and low use of helmets, seat belts and child restraints in vehicles as the main contributing factors. In 2004, road accidents was the top ninth cause of death in 2004.
Calling road fatalities an "epidemic" that will become the world's fifth biggest killer by 2030, the report said while rich nations had been able to lower their death rates, these were sharply on the rise in the third world. It said 90% of deaths on the world's roads occur in low and middle-income countries (21.5 and 19.5 per lakh of population, respectively) though they have just 48% of all registered vehicles.
Here's a Bloomberg report on rising consumer spending and growing FMCG sector in Pakistan:
...“The rural push is aimed at the boisterous youth in these areas, who have bountiful cash and resources to increase purchases,” Shazia Syed, vice president for customer development at Unilever Pakistan Ltd., said in an interview. “Rural growth is more than double that of national sales.”
Nestle Pakistan Ltd., which is spending 300 million Swiss francs ($330 million) to double dairy output in four years, boosted sales 29 percent to 33 billion rupees ($377 million) in the six months through June.
“We have been focusing on rural areas very strongly,” Ian Donald, managing director of Nestle’s Pakistan unit, said in an interview in Lahore. “Our observation is that Pakistan’s rural economy is doing better than urban areas.”
The parent, based in Vevey, Switzerland, aims to get 45 percent of revenue from emerging markets by 2020.
Haji Mirbar, who grows cotton on a 5-acre farm with his four brothers, said his family’s income grew fivefold in the year through June, allowing him to buy branded products. He uses Unilever’s Lifebuoy for his open-air baths under a hand pump, instead of the handmade soap he used before.
Sales for the Pakistan unit of Unilever rose 15 percent to 24.8 billion rupees in the first half. Colgate-Palmolive Pakistan Ltd.’s sales increased 29 percent in the six months through June to 7.6 billion rupees, according to data compiled by Bloomberg.
Unilever is pushing beauty products in the countryside through a program called “Guddi Baji,” an Urdu phrase that literally means “doll sister.” It employs “beauty specialists who understand rural women,” providing them with vans filled with samples and equipment, Syed said. Women in villages are also employed as sales representatives, because “rural is the growth engine” for Unilever in Pakistan, she said.
While the bulk of spending for rural families goes to food, about 20 percent “is spent on looking beautiful and buying expensive clothes,” Syed said.
Colgate-Palmolive, the world’s largest toothpaste maker, aims to address a “huge gap” in sales outside Pakistan’s cities by more than tripling the number of villages where its products, such as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali, rural operations manager at the local unit.
Unilever plans to increase the number of villages where its products are sold to almost half of the total 34,000 within three years. Its merchandise, including Dove shampoo, Surf detergent and Brooke Bond Supreme tea, is available in about 11,000 villages now.
Pakistan, Asia’s third-largest wheat grower, in 2008 increased wheat prices by more than 50 percent as Prime Minister Yousuf Raza Gilani sought to boost production of the staple.
“The injection of purchasing power in the rural sector has been unprecedented,” said Sherani, who added that local prices for rice and sugarcane have also risen.
Increasing consumption in rural areas is forecast to drive economic growth in the South Asian country of 177 million people, according to government estimates.
Higher crop prices boosted farmers’ incomes in Pakistan by 342 billion rupees in the 12 months through June, according to a government economic survey. That was higher than the gain of 329 billion rupees in the preceding eight years.
Telenor Pakistan (Pvt) Ltd. is also expanding in Pakistan’s rural areas, which already contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications director for the local unit of the Nordic region’s largest phone company.
SIAM, India's auto-industry lobby, forecasts sales growth will slow to 2% to 4% for the year ending April, about one-tenth of what it was last year, according a report in the Wall Street Journal.
Rising prices are usually something auto makers welcome. Not in India.
As recently as April, some Indian auto makers were struggling to produce enough cars to meet demand as sales hit successive monthly highs.
But thanks to rising interest rates, buyers are hitting the brakes.
Across the industry, sales fell 16% in July compared with last year and 10% in August. September's decline was a relatively mild 1.4%, the Society of Indian Automobile Manufacturers reported Monday, though sales figures in the three ...
Here's more from Reuters:
NEW DELHI, Oct 10 (Reuters) - Car sales in India are expected to rise just 2 to 4 percent this fiscal year, an industry body said, cutting its forecast for the second time this year, as high interest rates and rising costs continue to hit demand in Asia's third-largest economy.
The growth forecast is down from the earlier estimate of 10 to 12 percent by the Society of Indian Automobile Manufacturers (SIAM), and 16 to 18 percent before that. Car sales had jumped 30 percent in the fiscal year 2010/11 that ended March.
"If the government continues to raise fuel prices and interest rates continue to go up the demand for cars will remain subdued," S Sandilya, President, SIAM and Chairman, Eicher Motors , told reporters.
Indian car sales last grew in single digits in 2008/09, at 1.39 percent.
Demand for cars in the world's second-fastest growing auto market after China has also been dented in recent months by rising vehicle costs, with many first-time buyers plumbing for motorcycles or scooters.
Car sales fell 1.8 percent in September to 165,925 cars, data released by SIAM showed on Monday. Demand for cars shrunk in July for the first time in nearly three years.
However, sales of commercial vehicles, a key pointer to the country's economic activity, rose 18.05 percent to 70,634, while motorcycle sales rose 19.93 percent to 933,465 vehicles.
India's central bank has raised interest rates 12 times since March last year in an effort to battle stubbornly high inflation, a move that has hurt credit-based purchases and slowed economic growth.
The Indian car market, which saw a 10 percent decline in August, is driven by a burgeoning and aspirational middle class that mostly relies on bank loans for purchases.
Maruti Suzuki , India's largest car maker, and 54.2 percent owned by Japan's Suzuki Motor Corp , posted a 21 percent drop in September sales, but rival Tata Motors , which makes both commercial vehicles and cars, reported a 22 percent increase for the month.
"The way things have been going in the last few months, this is a realistic number. While there is some uptick in festive demand, it's nowhere close to what it was in the last two years," said Vineet Hetamasaria, auto analyst at Mumbai's PINC Research.
SIAM raised its growth forecast for commercial vehicles to 13 to 15 percent, from the earlier forecast of 12 to 14 percent.
"Demand for movement of goods still remains, because the economy is still growing at 7 to 8 percent," SIAM's Sandilya said.
Some commentators have bragged about passenger car ownership figures in India vs Pakistan. The latest available World Bank data (2006-7 shows that they are pretty close: 9 per 1000 in Pakistan vs 10 per 1000 in India.
I believe it does include dangerous contraptions like jugaads often seen plying on Indian roads.
Here's a report in The Nation newspaper on Pakistan's auto parts industry:
The auto sector has taken initiative to organize the show for local auto part vendors to look for more export opportunities. Praising the efforts of local vendors in developing the engineering base and enhancing the skill sets of local engineers, they said that it is for the efforts of OEMs that local auto manufacturers have achieved 60 percent localization.
The auto sector is fully committed to localization process and has already developed 60 vendors and has arranged 34 technical assistance agreements for transfer of technology. In this regard, the IMC has invested Rs13 billion in development of internal infrastructure which includes Press Shop, Engine Shop and Paint Shop.
The OEMs have invested over Rs75 billion in local auto industry and it contributes more than 5 percent annually towards the national exchequer. Moreover OEMs and auto parts manufacturers employ around 200,000 people and supports employment of over 1,392,000 persons throughout its supply chain of vendors, suppliers and dealers.
The auto industry experts expressed confidence that the show will attract local and foreign investors and that the local auto industry will get support from government and policy makers which will help open doors for exploring foreign markets.
The local car manufacturers including the Indus Motors Company are the platinum sponsor for Pakistan Auto Parts Show (PAPS 2011) aimed to provide a platform for local engineering firms to introduce their products.
The auto sector in Pakistan is committed to play its role in the development of engineering base of the country. So, sponsoring ‘PAPS 2011’ is a step in this direction, which will showcase the achievements of Pakistan auto industry.
Here are some excerpts from a Bloomberg report on increasing auto sales and profits at Indus Motors in Pakistan:
Car sales in Pakistan increased 26 percent to 38,065 units in the quarter ended Sept. 30 from a year earlier, the Pakistan Automotive Manufacturers Association said Oct. 10. Indus sold 12,820 cars in the period, rising from 11,792 a year earlier, according to the association.
Oct. 25 (Bloomberg) -- Indus Motor Co., Toyota Motor Corp.’s affiliate in Pakistan, posted a 62 percent gain in first-quarter profit as rising incomes boosted sales.
Net income climbed to 937.5 million rupees ($11 million), or 11.93 rupees a share, in the three months ended Sept. 30, from 577 million rupees, or 7.35 rupees, a year earlier, the Karachi-based company said in a filing today. Sales gained 20 percent to 17.1 billion rupees.
Sales of the Cuore, Corolla, and Hilux models assembled by Indus increased more than 9 percent during the three months, according to Shahbaz Ashraf, an analyst at Arif Habib Ltd. Remittances to Pakistan gained 25 percent to $3.3 billion in the period, the nation’s central bank said Oct. 10.
“Rising remittances and farm incomes helped pushed sales for the company,” Ashraf, who has a “buy” recommendation on the stock, said by telephone from Karachi before the company’s announcement.
Indus, Pakistan’s second-largest carmaker, didn’t provide reasons for the profit increase in its filing.
Shares of Indus climbed 2.5 percent to 199 rupees as of 1:24 p.m. on the Karachi Stock Exchange, paring the stock’s decline this year to 21 percent.
Higher crop prices boosted farmers’ incomes in Pakistan by 342 billion rupees in the 12 months through June 30, more than the annual gain of 329 billion rupees in the preceding eight years, according to an economic survey published by the Ministry of Finance.
Here's a Pakistan Today report on motorcycle manufacturing in Pakistan:
Karachi - To effectively cope with domestic market of over 1.5 million units and after successful launch of their products in global markets, the local motorcycle producers are now planning a further investment of $100-150 million in their existing units.
The motorcycle industry analysts have pointed out that despite numerous hiccups faced by the economy in recent years, growth in motorcycle production has been robust at 15 per cent. “A decade back, the total motorcycle production in Pakistan was around 100,000 units, now the largest player alone is rolling out half a million units while total production of two wheelers has crossed 1.5 million. They said that the encouraging aspect in this regard is that industry is on the path to sustained growth. The local demand for motorcycles is likely to exceed 2 million units within a year or two,” they added.
“The global response to our quality motorcycles indicate a sustained and healthy growth in exports as well” they opined, adding that in fact, the industry experts are seeing themselves as the largest exporters in the engineering sector. A sustained growth is only possible due to regular investment and up-gradation of technology in the motorcycle industry. “The growth we see in motorcycle production would not have been possible without investment”, they added.
In this regard, Fahad Iqbal CEO, HKF Engineering, makers of Ravi motorcycles said that the industry now has to fulfill the growing demand in both domestic and global markets and for this, it needs to invest over $100 million in the next couple of years to keep abreast with market needs and demands. He said that all the motorbike producers having production of 50,000 units or above are now planning to expand their capacities to cope up with the market demands.
“There are almost a dozen players that have achieved this production level” he said, adding that even if each of them invests $10-15 million, the total investment would cross $150 million. These units have been regularly making investments to increase their market share but now they have reached a level where they have to invest in high-tech parts to ensure that instead of having 90 per cent local components, Pakistani bikes are produced by 100 per cent local parts, he added.
Market analysts urged that in such an encouraging situation, the government should refrain from taking steps that might jeopardise this investment. He said that an investment of $150 million by local players without any government concession is better than vying for similar investment over a period of 10 years from a foreign company. The current players, from Italy, China and Japan, are also in various stages of developing new models in the 100-150 cc range with the latest technology, he said. However, he added, they were not offered any relief even on imports of the environmentally friendly Euro 2 components, which have already been introduced in local bike production.
“Capacities exist in the country in areas like sheet metal parts and there is a huge investment need in areas such as die casting for parts like crank cases and crank covers, electronic parts such as CDI units, engine parts like ACG, clutch, pistons, shock absorbers (cushions), plastic parts such as emblems” said Arshad Awan CEO General Engineering and added that even capacity enhancement and thus investment will be needed in low-tech parts like head lights, tail lights etc.
Here are some of the findings of a recent paper by Durre-e-Nayab of Pakistan Institute of Development Economics (PIDE) titled "Estimating the Middle Class in Pakistan":
Depending on the definition applied, it is found that the size of the middle class ranges drastically in the country, as can be seen from Table 2. Applying the definitions having solely an economic rationale, we find the middle class to range from 60 per cent of the population (Table 2, Definition One) to being totally non-existent (Table 2, Definition Five). Translating it in number of people, using the population base of 187 million as it stands on mid-year 2011 (USCB, 2011 and UN, 2009), the size of the middle class ranges from a huge 112 million to no one. This variability, as stressed earlier, reflects the complexities and
arbitrariness associated with defining and measuring the middle class.
Among all the definitions given above, Definition Eight and Definition Thirteen, based on gradation of income and expenditure per person per day, respectively, are currently the most
extensively used measure employed to estimate the middle class (as also used by Chun (2010) and Bhandari (2010) among others)3. This definition too, however, suffers from the same drawback of relying solely on one criterion. As also pointed out by Eisenhauer (2008), Atkinson and Bourguignon (1982), Kolm (1977), Bourguignon and Chakravarty (2003) and Gilbert (2003), being a part of the middle class should be ascertained by a person’s socio-economic attributes holistically. Income is an important aspect but other qualities like level of health, wealth,
education and specialised knowledge are also significant factors for constituting a class. Technically speaking too, most of the definitions suffer from serious drawbacks. For instance, the ‘quintile approach’ can be useful in measuring or comparing income or expenditure growth but cannot be used as a method to estimate the middle class as the size cannot shrink or expand and by definition would permenantly remain at 60 percent. Any denomination of the median income should also be used with caution in low income countries like Pakistan. Taking 75 per cent of the median income might lead to the inclusion of people below the poverty line in countries with very low income levels. In the above-stated definitions and resulting estimates there are issues with the lower bounds
set for inclusion in the middle class. While some of the definitions (like Definition Three and Five) set the limit too high4, resulting in a very small middle class or in the absence of a middle class altogether, there are other definitions that set the limit too low, like those that set the lower
bound at $2 per person per day. Does the middle class begin where poverty ends? Ravallion (2010: 446) supports, “the premise that middle class living standards begin when poverty ends”.
This paper, however, supports the argument forwarded by Horrigan and Haugen (1988:5) when they posit, “to ensure that the lower endpoint of the middle class represents an income
significantly above the poverty line”. The middle class should, hence, include only those households that do not face the risk of experiencing poverty at all, and are not just those who
are outside the the realm of poverty at a particular time.
Indian auto sales continue to drop by double digits, according to India Today:
October's festive cheer failed to revive car sales during the month as higher interest rates and rising fuel prices kept potential buyers away.
Leading car maker Maruti Suzuki India Ltd (MSIL), reeling under the workers strike, was the hardest hit with sales falling to less than half of last year's level for the month.
The firm's domestic sales dipped by 52.16 per cent at 51,458 units in October 2011, from 107,555 units sold in October, 2010.
MSIL's small car sales (M800, A-Star, Alto and WagonR) fell by 54.86 per cent to 25,009 units against 55,404 units in October, 2010. The compact segment (Estilo, Swift and Ritz), posted a 56.09 per cent dip in sales to 10,859 units.
Sales of DZiRE decreased by 48.14 per cent to 5,001 units and SX4 fell by 83.81 per cent to just 320 units. MSIL sold only three units of its luxury sedan Kizashi.
India's number two car maker Hyundai Motor India Ltd (HMIL) reported a 4.95 per cent drop in sales to 33,001 units from 34,720 units in October last year.
"We have seen that sales get a boost in the festival season, but this year, sentiment has been tepid. We don't expect a major upswing in the near future, the challenging economic environment is affecting industry," Arvind saxena, director (marketing and sales), HMIL, said.
In the A2 segment (Eon, Santro, i10 and i20), the company sold 41,204 units, while in the A3 segment (Accent and Verna), sales stood at 6,929 units. While the new Santa Fe SUV attracted 190 buyers its small car Eon has received more than 9,000 bookings till date.
Tata Motors saw a marginal 2.64 per cent increase in its passenger vehicles sales in the domestic market at 25,124 units in October, from 24,478 units sold in October 2010. While the Indica family sales stood at 10,812 units, up 11 per cent, the Indigo family recorded drop in sales by 24 per cent at 6,268 units. Sales of Sumo, Safari and Aria grew by 23 per cent to 4,176 units and Nano sales recorded 26 per cent increase at 3,868 units....
Read more at: http://indiatoday.intoday.in/story/october-car-sales-dip-costly-fuel-higher-interest-rates/1/158264.html
Here's an excerpt from Dr. Ishrat Husain's comp of India-Pak economy:
Pakistan is one of the few developing countries that has achieved an average annual
growth rate of over 5 percent over the six decades. Consequently, the incidence of poverty has
declined from 40 percent to 24 percent. The salient features of Pakistan’s economic history are
• A country with 30 million people in 1947 that couldn’t feed itself and had to import all its
food requirements is not only able to fulfill the domestic needs of 170 million people at a
much higher per capita consumption level, but also exports wheat and rice .
• An average Pakistani earned about $ 1050 in 2009 compared to less than $ 100 in 1947.
In US current dollar terms the per capita income has expanded almost ten fold.
• Agriculture production has risen five times with cotton attaining a level of more than 12
million bales compared to 1 million bales in 1947. Pakistan has emerged as one of the
leading world exporter of textiles.
• Manufacturing production index is well over 13,000 with the base of 100 in 1947. Steel,
cement, automobiles, sugar, fertilizer, cloth and vegetable ghee, industrial chemicals,
refined petroleum and a variety of other products are manufactured for the domestic
market and in many cases for the world market too.
• Per capita electricity generation has reached 10,160 kwh compared to 100 in 1947.
Pakistan’s vast irrigation network of large storage reservoirs and dams, barrages, link
canals constructed during the last five decades has enabled the country to double the area
under cultivation to 22 million hectares. Tubewell irrigation provides almost one third of
additional water to supplement canal irrigation.
• The road and highway network in Pakistan spans 250,000 km-more than five times the
length inherited in 1947. Modern motorways and super highways and four lane national
highways link the entire country along with secondary and tertiary roads.
• Natural gas was discovered in the country in the 1950s and 32 billion cubic feet of
natural gas is generated, transmitted and distributed for industrial, commercial and
domestic consumption accounting for 50 percent of the country’s energy needs.
• Private consumption standards have kept pace with the rise in income. There are 52 road
vehicles for 1000 persons relative to only one vehicle for the same number of population
in 1947. Phone connections have reached 100 million from almost scratch. TV sets which
were non-existent adorn 62 out of every 1,000 houses.
Pakistan auto sales up 24% in October, reports Daily Times:
KARACHI: Pakistan Automotive Manufacturers Association (PAMA) has released local automobile industry’s sales and production numbers for the month of October 2011. As per data, auto sales of the industry witnessed a substantial growth of 24 percent year to year (YoY) to 58,576 units in four months of fiscal year 2012 (FY12) as against the sales of 47,143 units in the corresponding period last year.
The main reason behind this substantial volumetric growth seems to be incentive given by the government to local auto manufacturers in terms of removal of Special Excise Duty (SED) of 2.5 percent on imported and manufactured vehicles coupled with reduction in General Sales Tax (GST) from 17 percent to 16 percent in addition to the low base effect. Pak Suzuki Motor Company Limited (PSMC) witnessed a 38 percent YoY growth to 34,877 units in 4M FY12 as against the sales of 25,279 units in same period last year.
Highest growth was observed in the sales of Suzuki Swift of 140 percent YoY to 2,328 units as against 969 units in the same period last year.
Liana under the domain of 1300cc and above segment also witnessed a handsome 37 percent YoY jump in its sales to 168 units in comparison of 123 units in the same period last year.
Ravi, the pickup, experienced a massive 23 percent growth to 5,722 units versus 4,665 units same period last year. Indus Motor Company Limited (INDU) witnessed a 7 percent YoY growth in sales to 17,806 units in 4M FY12 as against 16,622 units in same period last year. Hilux, under pickup segment led the growth in sales of the company with a gigantic 135 percent YoY to 1,099 units as against 647 units in the same period last year.
Toyota Corolla posted upsurge in sales by 6 percent YoY to 15,175 units as against 14,622 units in the same period last year. Cuore remained as the only segment of the company, whose sales experienced a decline of 19 percent YoY to 1,532 as against sales of 1,893 units in the same period last year. Honda Atlas Cars Pakistan Limited (HCAR) also showed a handsome growth in its sales of 14 percent YoY to 5,893 units in 4M FY12 as against the sales of 5,172 units in 4M FY11.
The main reason behind growth was low base effect. The City, the most liked segment of consumers post 20 percent YoY growth to 3,647 units as against sales 3,041 units in same period last year.
Civic another product of the company in 1300CC and above segment posted a modest rise of 5 percent YoY to 2,246 units in comparison of 2,131 in corresponding period of last year.
As far as the market share is concerned, PSMC leads the market with 60 percent market share followed by IMC and HCAR with 30 percent and 10 percent market share in 4M FY12.
Online News: Half of Pakistan’s population may live in cities by 2030
ISLAMABAD: More than half of Pakistan’s population is estimated to be living in cities by the year 2030. Both natural increase and net migration are major contributory factors to urban growth.
These views were expressed by participants of a seminar on “Business and the Middle Class in Pakistan organized by the Planning Commission of Pakistan which was held here on Wednesday.
The seminar included speakers and discussants from some of the largest companies and businesses in Pakistan, coming together to discuss the importance of the evolving middle class in Pakistan.
The participants said that current urban growth rate was approximately 3.5 per cent as compare to 2 per cent nationally. More rural people are migrating to urban centers for higher-paying jobs. Upward social mobility creating and expanding the middle class.
Given the low median age, Pakistan’s middle class is unusually young as compared to developed economies, meaning that younger population will have the most disposable incomes.The expanding middle class consumers will aim for first world aspirations and greater focus will be on branded retail products. The middle class has been growing in number as well as in importance all over the world, which is why businesses strategize targeting this specific class.
The participants said that the middle class is conceptually defined as the class between the rich and the poor; however its boundaries are usually made arbitrarily. It is also important to note the multi-dimensionality of an adequate definition; a person belonging to the middle class needs to be evaluated not only on a monetary basis, other aspects of quality of life and available opportunities need to be encapsulated to arrive at a well rounded definition.
They said that studies show a positive relationship between the higher share of income for the middle class and economic growth as well as political aspects like democracy. Other studies indicate the emergence of entrepreneurs from the middle class. It is the middle class that was the driver of success in India and China.
They said that the biggest opportunity of the rising middle class, at present and future will be for companies selling mass-consumer goods and services. As incomes rise spending patterns will incorporate discretionary and small luxury items while proportionate expenditure on food, clothing and other necessities tend to shrink.
While the basics may decline as a share of consumption, in absolute terms they will continue to grow. Housing, healthcare and educational expenses are expected to register a greater share of the wallet – this spending will be driven by the strong link between education and higher salaries, as well as growing number of options for both higher and vocational education.
Rising per capita income and a growing, young population spending more time online and at Western movies are helping build a mass market in Pakistan, according to Businessweek:
One way to take a city’s economic pulse is to check out where locals shop. In Karachi, Pakistan, shoppers are flocking to Port Grand, which opened in May. Built as a promenade by the historic harbor for almost $23 million, the center caters to Pakistanis eager to indulge themselves. This city of 20 million has seen more than 1,500 deaths from political and sectarian violence from January to August. At Port Grand the only hint of the turmoil is the presence of security details and surveillance cameras. “The whole world is going through a new security environment,” says Shahid Firoz, 61, Port Grand’s developer. “We have to be very conscious of security just as any other significant facility anywhere in the world needs to be.”
Young people stroll the promenade eating burgers and fries and browsing through 60 stores and stalls that sell everything from high fashion to silver bracelets to ice cream. Ornate benches dot a landscaped area around a 150-year-old banyan tree. “Port Grand is something fresh for the city, very aesthetically pleasing and unique,” says Yasmine Ibrahim, a 25-year-old Lebanese American who is helping set up a student affairs office at a new university in Karachi.
One-third of Pakistan’s 170 million people are under the age of 15, which means the leisure business will continue to grow, says Naveed Vakil, head of research at AKD Securities. Per capita income has grown to $1,254 a year in June from $1,073 three years ago.
The appetite for things American is strong despite the rise in tensions between the two allies. Hardee’s opened its first Karachi outlet in September: In the first few days customers waited for hours. It plans to open 10 more restaurants in Pakistan in the next two and a half years, says franchisee Imran Ahmed Khan. U.S. movies are attracting crowds to the recently opened Atrium Cinemas, which would not be out of place in suburban Chicago. Current features include The Adventures of Tintin and the latest Twilight Saga installment. Mission: Impossible—Ghost Protocol is coming soon. Operator Nadeem Mandviwalla says the cinema industry in Pakistan is growing 30 percent a year.
Exposure to Western lifestyles through cable television and the Internet is raising demand for these goods and services. Pakistan has 20 million Internet users, compared with 133,900 a decade ago, while 25 foreign channels, such as CNN (TWX) and BBC World News, are now available. And for many Pakistanis, reruns of the U.S. sitcom Everybody Loves Raymond are a regular treat.
The bottom line: With per capita income rising quickly, Pakistan is developing a mass market eager for Western goods.
India car prices rising as Indian rupee hits record lows, reports Wall Street Journal:
NEW DELHI – Several auto makers in India have decided to increase their vehicle prices in January due to rising raw material costs and a fall in the local currency’s value, which has made imports of parts more expensive.
The local units of Hyundai Motor Co., General Motors Co., Ford Motor Co. and Toyota Motor Corp. will increase vehicle prices on Jan. 1. Suzuki Motor Corp’s unit already increased prices of its diesel models last month.
The Indian rupee is the worst-performing Asian currency this year, with the U.S. dollar rising nearly 16% against the local unit. Auto makers, especially the local units of foreign companies, import large amounts of parts and the rupee’s weakness has driven up their costs.
They have also been hit by higher prices of key raw materials such as steel and aluminum.
Raising vehicle prices could further damp demand for vehicles, which has remained weak since June due to rising fuel costs and higher interest rates on loans.
Hyundai Motor India Ltd.’s director of sales and marketing, Arvind Saxena, said factors such as inflation and the rupee’s depreciation have “compelled us to look at a price increase.”
The company will increase the prices of all its vehicles by 1.5%-2.0%.
Maruti Suzuki India Ltd. raised prices of the diesel variants of four models by up to 10,000 rupees ($195), and it will consider a similar increase for gasoline-powered vehicles after December as an appreciation in the Japanese yen has made parts imports expensive, India’s largest car maker said on Dec. 1.
The company expects its operating profit margin to shrink 1.0 percentage point during October-March due to the currency effect.
Ford India will raise prices of all vehicles by up to 3%, while General Motors India will increase prices of most models by 1%-2%.
P. Balendran, vice president for corporate affairs at GM India, said it will increase the price of the diesel variant of its Beat small car by 15,000 rupees as it is currently being sold at introductory rates.
Toyota Kirloskar Motor Pvt. Ltd. also said it will lift prices by up to 3%.
Honda Siel Cars India Ltd., however, said it isn’t considering raising prices right now. “Our immediate priority is to make sufficient cars to meet demand,” said Jnaneswar Sen, senior vice president of marketing and sales.
The company has been forced to cut production due to a shortage of parts from Thailand following heavy floods there.
A Tata Motors Ltd. spokesman refused to comment, while executives at Mahindra & Mahindra Ltd. couldn’t be contacted.
Here's an Express Tribune report tiled "Nokia Sees Pakistan Becoming a High-Growth Market":
KARACHI: Foreign delegates and local entrepreneurs discussed challenges facing businesses, sought greater industry-academia collaboration and highlighted business models to succeed in an emerging market at the 12th Management Association of Pakistan (MAP) Convention on Leadership Challenges for Business Success here on Wednesday.
Emerging markets will account for 80% of the world’s growth the next decade and Pakistan will be an important emerging market in future, Senior Vice President of Nokia India, Middle East and Africa Shivakumar said in a speech titled “Winning in emerging markets”.
Speaking to a conference packed with businessmen, Shivakumar – who is also the senior vice president of All India Management Association (AIMA) – said growth in developed economies has slowed down dramatically and the world is now looking at emerging markets, which account for 42% of population and 13% of income.
Pakistan is listed in four categories of emerging markets including Dow Jones 35 and emerging and growth level economies (EAGLES), he said. “Pakistan will be an important high-growth emerging market.”
In order to succeed in an emerging economy, he said, it is important to understand its segments and consumers. The emerging market consumers – most of whom live under $2 a day – are value-sensitive and not price-sensitive, he said and added entrepreneurs have to work on their business models to accommodate that segment of consumers who believe in the doctrine of “pay more, get more” and “pay less, get less”.
Sharing his experiences, he said, there are three things that he applied and succeeded. “Always put the country’s interest first, keep fixed costs very low and turn as many cost variables as possible,” he said.
“Never cut the features and offer your product at half the price. Consumers don’t want an incomplete product.”
Speaking to the participants earlier on, event’s chief guest and State Bank of Pakistan Governor Yaseen Anwar said it is time for all business leaders and managers to take the lead. Leaders must be more aware of the challenges facing the country – inflation, unemployment and power crisis.
There are no shortcuts to sustained economic development, Anwar said. “We need to develop the right strategies and then translate these strategies into action.”
AIMA President Rajiv Vastupal also addressed the event, saying IMF has lowered growth projection for both 2011 and 2012. “Today’s corporate leaders must focus on innovation to counter the global economic challenges,” he said. He elaborated the successful example of Apple’s iPad, which was launched during recession and earned a great success.
Here's an interesting story in Express Tribune on the rise of the middle class via banking sector:
Hasan Rizvi used public transport to get around the city, and didn’t have a house of his own 10 years ago, while he studied for a Bachelor of Commerce degree at a college affiliated with University of Karachi. Today, he owns two motorcycles, one car and a modest apartment in a middle-class neighbourhood that he rents out to supplement his monthly income.
Rizvi’s upward movement on the social ladder corresponds with the growth in Pakistan’s banking sector that he has been part of since 2004.
In 2000, the combined profit-before-tax of all Pakistani banks was Rs4.5 billion. It reached Rs80.7 billion in 2009 – almost 17-fold increase over nine years!
With more than 8,000 branches of 41 scheduled banks all over the country, the banking sector has witnessed phenomenal growth in the past 10 years: assets of the banking system have been growing at an average of 14.8 per cent since 2001.
The exceptional growth in the banking sector has created thousands of private-sector jobs. The public sector controlled almost 80 per cent of the banking industry in 1997. However, after privatisation of several banks, the figure reduced to 20 per cent in 2004.
Rizvi said that to buy his apartment he took out a loan from his bank in 2008 at a reduced interest rate. Generally, the mark-up on home loans for ordinary customers is around 20 per cent. But the interest rate Rizvi is paying on his home loan as a bank employee is just five per cent.
He said he now lets out the apartment for Rs14,000 a month. The monthly instalment he pays to his bank is Rs.13,000, which means that without paying a single rupee out of his pocket, Rizvi not only bought his own apartment, but also makes an additional Rs1,000 every month – thanks to the fringe benefits of his bank job.
Similarly, car financing is also cheap for bank employees. While ordinary customers pay a 16-18 per cent mark-up on car loans, a bank employee gets it at a nominal rate of about five per cent.
“Every banker out there drives his own car and lives in, or rents out, his own flat. Banks pay well. And they give you facilities no other employer can afford to give its employees,” Rizvi said.
High profits for commercial banks over the past decade have resulted in the expansion of the banking sector, creating more jobs and promising better compensation packages for middle-class young men and women with tertiary education.
There are many reasons for the expansion in the banking sector in Pakistan. Most importantly, privatisation of nationalised banks spurred growth and increased overall banking standards in the 2000s. The share of private-sector banks in aggregate assets of the banking industry surged from 44 per cent in 2000 to over 77 per cent in 2005....
Here's an Express Tribune story speculating about Wallmart entry in Pakistan retail market:
...“We have not made any announcements concerning Pakistan,” said Megan Murphy, Walmart’s international corporate affairs manager in an e-mail. Walmart does not comment on market entry speculation, she added.
Murphy, however, said their priorities are to “concentrate on the markets where we already have operations and look for growth opportunities in markets where customers want to see us and where it makes sense for our long-term growth.”
While Pakistan clearly does not fall into the first category, its regulatory environment has been far more welcoming than neighbouring India, where the government was recently forced by populist protests to roll back reforms that would have allowed Walmart and other foreign retailers in. The Pakistani retail market, currently estimated at $42 billion and rapidly growing, is viewed as an attractive opportunity for foreign investors.
“To say Pakistan is not on Walmart’s opportunity radar screen, I don’t agree,” said Afnan Ahsan, CEO of Engro Foods, one of the largest consumer goods companies and a subsidiary of the Engro Corporation.
Pakistan is a very large and concentrated consumer opportunity. Karachi alone accounts for 40% of any consumer business, Ahsan said. “It is on every big player’s radar screen,” he added.
Despite recent troubles, Pakistan’s $210 billion economy has been mentioned by several global analysts as a potent force to be reckoned with in the future, including Goldman Sachs’ Jim O’Neill, the man famous for creating the term BRICs. Goldman includes Pakistan in its list called the Next Eleven, economies that are expected to become some of the most important sources of global growth.
The growing middle class – one-third of the country’s population of 180 million, of which 55% age below 30 – has already prompted international players like Germany’s Metro Cash and Carry and France’s Carrefour to enter the market.
MCC has recently acquired Makro and now has a network of 10 stores in Karachi, Lahore, Faisalabad and Islamabad. Hyperstar – Carrefour’s joint venture with the UAE’s Majid Al Futtaim Group – has one store each in Karachi and Lahore. It also announced opening of four more stores in Karachi and extend its chain to every metropolitan city in Pakistan.
Besides international wholesalers and retailers, local supermarkets – Imtiaz Supermarket in particular – have also been expanding their businesses.
Government officials also have a more welcoming attitude. “Personally speaking, Walmart will be very viable in Pakistan,” said Liaquat Ali Gohar, head of marketing at the Small and Medium Enterprise Development Authority. He said that the retail sector so far has not been able to meet the overall demand.
While the retail sector has grown significantly over the last few years, most of the development took place in the big cities. Misbah Iqbal, a consumer goods analyst at AKD Securities, pointed out that the rural people – about 55% to 60% of the total – are still underserved.
Pakistan is rapidly urbanising, Iqbal said. Despite many new entrants in the supermarket business, all of them are attracting huge traffic and growing significantly, she said, though largely in the major metropolitan areas.
Poor infrastructure in rural areas prevents investment. Nevertheless, many consumer goods companies are actively marketing to rural consumers, creating awareness about branded products, Iqbal said. Retailers will automatically benefit from that, she added....
The State Bank said on Wednesday that the value of e-banking transactions aggregated to Rs12 trillion during the second half of 2010-11, showing an increase of 19 per cent as compared to the first half of the year, according to a Dawn report:
The Payment Systems Half Yearly Review released by the State Bank here noted speedy rise in e-banking transactions in the country.
The volume of such transactions during the period under review reached 125.9 million depicting an increase of 15.5 per cent as compared to the first half of FY11, the review said, adding that the payment system infrastructure has maintained an overall growth trend for the second half of FY11.
However, the review also said that the volume and value of paper-based retail payments during the second half of FY11 were recorded as 177.3 million and Rs84.6 trillion respectively, indicating an increase of 3.5 per cent in the volume of transactions.
“The value of transactions has increased by 13.3 per cent as compared to the first half of FY11. The contribution of paper-based payments in total retail payment transactions was 58.5 per cent in terms of volume and 87.5 per cent in terms of value,” it added.
The review said the Automated Teller Machines (ATMs), which are the largest channel of e-banking transactions, showed 16.5 per cent increase in number of transactions and 19 per cent increase in value raising the share of ATM transactions in total e-banking transactions to 58.8 per cent and 5.4 per cent respectively, the review said.
It said the number of Real-Time Online Branches (RTOB) transactions grew by 14.7 per cent and the value of transactions increased by 18.8 per cent as compared to first half of FY11. “These transactions contributed 31.6 per cent in total volume of e-banking and 93.2 per cent in the value of such transactions respectively,” the review observed.
According to the review, as many as 466 more Automated Teller Machines were added bringing the total number of ATMs to 5,200 while 380 more bank branches were converted into Real Time Online Branches (RTOBs).
“A total of 7,416 bank branches (78 per cent) are now offering real time online banking out of a total of 9,541 branches in the country. The number of plastic cards at 14 million also registered an increase of 6.2 per cent during the period under review as compared to the numbers during the preceding half year,” the Review added.
The overall increasing trend in payment system infrastructure was also witnessed in the large value payments settled through Pakistan Real-time Inter-bank Settlement Mechanism (PRISM), which increased by 14.8 per cent in volume and 21.9 per cent in terms of value as compared to the first half of FY11.
Here's an Express Tribune story on social mobility and a middle class suburb in Karachi:
The decision by Abdul Manan Shaikh’s family to move to Gulshan-e-Hadeed 10 years ago marked the beginning of his upward social mobility. Hailing from Larkana, where he learned the English alphabet at a government-run ‘taat’ school in sixth grade at an annual fee of less than Rs50, Shaikh has since attended three elite business schools of Karachi in the past decade.
Although he now drives a company car to a textile mill located in SITE every day, and attends evening classes at a business school in Clifton on weekends, he does not want to move out of Gulshan-e-Hadeed. In fact, his family bought a modest house there just three years ago.
So what makes Shaikh stay in a place as far removed from Karachi’s city centre as Gulshan-e-Hadeed?
Real estate in Gulshan-e-Hadeed is affordable. A 120-squareyard independent housing unit with a lounge, drawing room and two bedrooms with attached bathrooms costs somewhere around Rs2.5 million. Similarly, 240- and 500-squareyard housing units are available for around Rs5 million and Rs6.5 million, respectively.
The average monthly rent for a 120-squareyard, single-unit house in Gulshan-e-Hadeed is between Rs4,000 and Rs6,000. Compared with other middle-class areas of Karachi, that rate is cheap.
Moreover, an improvement in the city’s inner highways means that it takes almost the same time from these areas to go to the centre of the city. Gulshan-e-Hadeed may be a remote place in terms of kilometres, but an easy drive through National Highway and Sharae-Faisal makes it a choice neighbourhood for mid-level corporate managers, like Shaikh, who have company cars and receive subsidised fuel.
Peaceful and suburban
Although Gulshan-e-Hadeed is 48 kilometres from SITE, and 42 kilometres from Clifton, it offers what many localities closer to the centre of the city do not: better security.
Gulshan-e-Hadeed connects to the main city through National Highway and Shahrah-e-Faisal. Even during the worst law and order situations, one can expect these two roads to stay clear of trouble. Moreover, the ethnic and religious harmony within Gulshan-e-Hadeed, thanks to a heterogeneous population mix, has kept the crime rate under control for years.
All streets in Gulshan-e-Hadeed are paved and have ample space to park vehicles. There are no slums. Public transport is easily available, as buses leave for Karachi’s financial district every two to three minutes for the most part of the day.
Other than several degree colleges offering a decent standard of education, Gulshan-e-Hadeed is dotted with both government and private schools, including a cadet college and a branch of Beaconhouse School System in the adjoining Steel Town.
“A school, mosque and market are always at a walking distance from your home no matter which street of Gulshan-e-Hadeed you live on,” a local real estate dealer told The Express Tribune. “How many localities in Karachi offer that kind of closeness to these places?”
The real estate agent’s question is rhetorical. The fact that is that many of Pakistan’s largest cities now have similar suburban areas, which are in many ways similar to the Levittowns that sprouted around the United States after the World War II. Pakistan’s middle class has grown rapidly, and this is where many of them increasingly live.
Indeed, many of the villages that used to surround cities in Punjab’s GT Road belt have since turned into suburbs, no longer truly rural and offering an affordable option of the good life to many of the Pakistan’s up-and-comers. Indeed, these areas are acquiring a character of their own...
Here are some excerpts from an interesting Friday Times Op Ed on Pakistan's undocumented (informal & illegal) economy:
The economy is in the doldrums, but that is not news any more. What is more interesting, and more difficult to investigate, is what is happening in the world beyond the survey operator and tax collector's ambit. Papers published by the Social Policy Development Center (SPDC) in Karachi and the State Bank place the informal economy in a range of 20 to 30 percent of GDP. But most of this undocumented economy does not include strictly illegal, or shall we say criminal, practice.
that militant groups are running their own businesses (during the TNSM's movement in Swat, emerald mines were reputed to be in the hands of Maulana Fazlullah's men); that militants and terrorists are even coming up with new ways to generate funds (kidnapping for ransom being a case in point).
According to data from the UN, Afghanistan produced about 90% of the global output of opium in 2007. This fell to just over 62% by 2010 (with Myanmar accounting for most of the rest). Three quarters of the poppy production was in the provinces of Helmand and Kandahar, which border Pakistan. Domestic consumption of opium in Afghanistan is next to nil. Also, the country does not legally import the chemicals needed to process opium into heroin, although these are imported in Pakistan for legitimate uses. Almost 7,000 metric tons of opium, both raw and processed, in the form of morphine and heroin, leaves Afghanistan and finds its way to the lucrative markets of Western Europe.
Given that the global trade in opiates is estimated to have a value of some $70 billion, even a small proportion of the proceeds can make life comfortable for a lot of people in Pakistan.
With close to 80 suicide attacks in 2010, about 400 rocket attacks, and about 350 bomb blasts in addition to target killings, use of improvised explosive devices etc, its not hard to deduce that there is a significant trade in arms and ammunition in Pakistan. The ISAF container scam case led to some interesting findings. There were the obvious conclusions - including that the abuse of the Afghan Transit Trade facility is massive. More tellingly, the Supreme Court's suo moto case found that 7,922 ISAF containers simply went missing. In addition to the packed meals, the alcohol and the camp supplies stamped with ISAF logos that appear in border markets, the possibility of pilferage of more dangerous items cannot be ruled out.
The smuggling masked by the Afghan Transit Trade is another story altogether, and according to some stakeholders extends to the illegal trade in timber, antiquities and gemstones stemming from that unfortunate nation. Being a neighbor to a land-locked, war-ravaged country with no semblance of law and order was never going to be easy. But Pakistan's governance failures have made a bad situation worse.
There's much more to Pakistan's economy than meets the eye, and many of the more interesting activities are practically impossible to investigate unless someone is prepared to take considerable personal risks. The few pieces of the jigsaw puzzle that are available from public data and information paint a tantalizing picture. If the downslide of the formal economy continues, things could get even more interesting.
Excerpts from The News on Pakistan auto makers' contribution to economy:
The local auto industry manufacturers and vendors had paid total revenue of Rs64 billion last year while the industry saved foreign exchange of $500 million during the same period, said a presentation of the Indus Motor Company (IMC) to visiting journalists on Saturday.
With total investments of Rs92 billion and 0.4 million job opportunities, the local auto manufacturing industry has contributed substantially in the growth of national economy.
Despite some challenges and regulatory issues, the local auto industry has been flourishing and it is one of the important contributors in the country’s gross domestic product (GDP) growth, it added.
However, the local auto industry is a victim of government’s anti-industry policies like the import of used cars which are not only hurting the industry but also depriving the government of huge revenues in terms of duties.
Besides, the local auto manufacturers are fighting with the misperception that they charge exorbitant prices for vehicles while the quality is also not good. Yet, most of the facts once known would easily make the public to change perception about the industry.
The prices of cars have been increased by only 14 percent in last 2 years whereas the price of steel has increased by 16.5 percent, aluminum by 50.5 percent and polypropylene by 127 percent, minimum wage has increased by 75 percent, electricity and gas increased by 51 percent and 43.6 percent respectively during the same period.
Besides this, the depreciation of Pakistani rupee also played its role in increasing pressure on the industry, like the US dollar increased by 20 percent, Japanese Yen by 66 percent and Thai Bhatt by 22 percent.
Moreover, the duties on completely knocked down units (CKD) in Pakistan are much higher than other regional countries which contribute to high car prices. CKD duty in the country ranges between 32 to 50 percent, while in Thailand it is 30 percent and in India it ranges between 10 to 30 percent.
One of the major players of local auto manufacturing industry, IMC, while nullifying the stereotype image of the industry, has contribution of 1.5 percent/year to the national economy growth and maintained its image of quality production with plausible prices.
In addition, it has increased its production capacity from 20 units per day in 1993 to 210 units per day in 2011.
The company also created huge job opportunities as its number of direct employees increased from 496 in 1993 to 2,180 in 2011.
While commenting on IMC’s performance, CEO IMC, Parvez Ghias said that the buyer’s trust on the quality of the company’s products can be gauged by the fact that the company’s unit sales increased from 11,000 in 1993 to 51,000 in 2011.
Similarly, its units’ production increased from 2,930 in 1993 to 50,759 in 2011.
He said that IMC has been contributing heavily to the localization.
It is pertinent to note here that a total of 582 Corolla parts and assemblies are produced locally, while the company’s vendor-base has increased from 21 in 1993 to 60 in 2011 and these vendors are employing over 0.2 million people.
He said that on the part of dealership, the company’s 3S dealership increased from 21 in 1993 to 24 in 2002 and 34 in 2011 and of the total 34 3S dealership, 8 are in north region, 16 in central region and 10 in south region.
The company’s 3S dealership will increase to 66 till 2016.
Pakistan car sales up 20.5% July-Dec 2011, reports Dawn:
Car sales in the first half of current fiscal year went up by 20.5 per cent amid negative developments including the government’s decision to impose a ban on CNG kits and cylinders, suspension in production of Honda Civic and City and increase in prices of all vehicles.
According to figures shared by the Pakistan Automotive Manufacturers (PAMA), consumers purchased 12,240 more cars in July-December 2011 to 71,886 units as compared to 59,646 units in the same period of 2010.
Increase in production of Suzuki Mehran and Suzuki Bolan for onward supply to Punjab government’s Yellow Cab Scheme was the main reason that averted the negative impact of ban on CNG kits and cylinders and production halt of Honda cars on the overall production figures.
However, local assemblers are still perturbed over the government’s decision of imposing ban on CNG kits and cylinders. In this regard, Pak Suzuki Motor Company Limited (PSMCL), which holds over 50 per cent market share, may suffer more as it used to roll out 80 per cent CNG fitted vehicles out of its total production. Assemblers added that six months sales had risen due to previous orders and the impact of government’s decision would be visible in coming months. It must be noted that Toyota Corolla, which also launched CNG fitted vehicles few months ago, might also be affected by this decision.
Sarfaraz Abbasi, an analyst at Summit Capital, linked the growth in auto sales to removal of 2.5 per cent special excise duty and cut in the rate of General Sales Tax (GST) from 17 to 16 per cent.
Car sales in December 2011 plunged due to 92 per cent decline in sales of Honda Cars and flat sales of Indus Motor Company.
Honda Atlas Cars has suspended Civic and City production for December 2011 to January 2012 owing to non supply of parts from Thailand. Civic and City sales in December 2011 were recorded only 49 and 22 units as compared to 369 and 528 units in November 2011 respectively.
Nauman Khan of Top Line Securities said December 2011 sales declined as buyers preferred to defer orders due to year end phenomenon.
“Despite launch of new variants by the company in 1600cc segment and CNG vehicles (Eco), Toyota Corolla sales showed a decline on account of reduced farm income amid falling cotton prices,” he added.
Mehran leads: According to PAMA figures, production and sales of Mehran stood at 15,343 and 17,014 units as compared to 11,995 and 11,591 units in July-December 2010. Production and sales of Bolan rose to 8,052 and 8,848 units as compared to 6,978 and 6,483 units.
While other manufacturers suffered production and sales in December 2011 as compared to November 2011, production and sales of Mehran in December 2011 surged to 2,697 and 2,880 units as compared to 2,262 and 2,720 units in November 2011.
The production and sale of Bolan in December 2011 recorded at 1,603 and 1,968 units as compared to 1,380 and 1,369 units in November 2011.
Daihatsu Cuore continued to suffer as its production and sales plunged to 2,060 and 1,884 units in July-December 2011 as compared to 3,051 and 2,959 units in the corresponding period of 2010 due to reports of closure of its production in Pakistan from March this year.
Sale of Suzuki Cultus and Alto rose to 7,034 units in the last six months as compared to 5,599 while sale of Alto increased to 6,779 as compared to 5,762 units.
In 1,300cc and above, a total of 2,664 units of Honda Civic and 4,197 units of Honda City were sold in the last six months as compared to 2,918 and 3,957 units in the same period of 2010.
Suzuki Liana sales slightly stood at 199 units as compared to 188 units while Swift sales improved to 3,247 from 1,472 units.
Toyota Corolla sales grew to 20,020 units from 18,717 units.
Here's an Express Tribune story on housing trends in Lahore, Pakistan:
...as the middle class of the city has expanded, real estate developers have now increasingly begun to offer more affordable variants of the gated housing community, primarily by reducing the size of the average house. Builders predict the fastest growth in demand for the 125-square-yard duplex or townhouse, which is made affordable by offering an instalment plan for the full price, which can start as low as Rs1.2 million.
“The higher end of the market is saturated. Now the industry needs to cater to the rapidly growing middle class that is seeking comfortable housing facilities,” said Abdul Aleem Khan, who runs a real estate development business based out of Lahore.
“After completing one project with mostly larger units, I announced that I would build one with smaller, more affordable units and an easy instalment plan,” he said. “The response was very positive. People clearly need affordable housing and this [middle class] is a very neglected market segment.”
Eden Housing, one of the largest real estate companies in Pakistan, was the first to create such housing schemes in the 1990s, which typically include better roads and infrastructure than the rest of the city they are in. Since then, this formula has been copied by many developers, who saw how rapidly Eden was able to sell off its inventory.
“To live in such a community, which provides you with good infrastructure and security, is relaxing,” said Mujahid Ali, a resident of Eden Avenue, a gated community in Lahore developed by Eden Housing. “I moved here two years ago and have the peace of mind that there is no street crime or robberies within the scheme’s premises. My job requires me to visit other cities and I used to worry for my family’s safety. But since moving here, I can travel without that tension.”
Many of the facilities have hired a full-time staff of maintenance staff. The security is often provided by one of the more than 600 private security companies that now hire out both equipment and guards to a Pakistani middle class that is increasingly concerned for its safety.
Lahore has at least two dozen of these gated communities. In keeping with the temperament of the people in the Central Punjab region, there are hardly any apartments. Most of the housing units are bungalows, townhouses or duplexes. Some of the largest units can be spread over as much as 1,200 square yards, with the smallest ones generally being no more than 125 square yards. Other common sizes include 150 and 200 square yard units.
Builders often locate these communities close to major thoroughfares. Yet as real estate within Lahore proper grows increasingly scarce, many developers have begun to create such offerings on the outskirts of the city, taking advantage of the improvements in the transportation infrastructure in Punjab that includes a highway network comparable to that in some parts of the developed world. Once Lahore’s Ring Road is completed, such housing projects will be able to offer even faster access to the inner city.
Khan, the real estate developer, says that nearly all of the buyers of houses in these projects tend to be buying their own primary residences. “These schemes are not really meant for investors,” he said.
Here's a 2011 Dawn Op Ed on cement industry by Pakistan Cement Industry Association leader Tariq Saigol:
While the private sector performed magnificently whenever provided with an enabling environment, the response of the present government remains mired in confusion and inertia. Installed capacity was a paltry nine million tons in 1990, much of it being grossly inefficient as it was based on the outmoded wet process technology. As demand rose, the industry responded by launching a massive expansion programme. Over time, the installed capacity rose to nearly 44 million tons, a magnificent feat by any standards and a credit to the entrepreneurial spirit of the private sector.
However a number of adverse developments from 2007 onwards have brought the GDP growth to some two per cent. It is being reported by the media that the revised allocation after the latest cut, is a measly Rs180 billion. High inflation combined with slump in real estate and increase in the cost of production due to weakness of the dollar, resulting in a spike in coal prices, electricity and freight rates and accounting for 70 per cent of the cost, has adversely affected consumption while production cost soars, retarding construction activity in the private sector.
The current economic environment including low public spending has had disastrous consequences for the cement sector.
Local sales during the first half of the current fiscal year have witnessed an eight per cent year on year drop to around 10.1 million tons. Simultaneously, exports fell from 5.6 million tons to 4.6 million tons. The bad news does not end here. On top of low volumes, the average cement FOB prices fell to $48 per ton during the corresponding period— a level low enough to hardly break even.
Consequently cement sales through the sea route alone declined by about one third. Cement sales to India were also hard hit on account of non renewal of BIS certification (a quality control licence). Burdened with high energy and freight costs as well, the manufactures are desperate for some government support.
But no support is forthcoming. One would expect the government’s economic planners to appreciate the tremendous odds against which the industry is battling. If care of the cement industry is in short supply, then some thought may be given to the enormous exposure of the banks which have provided financing to the tune of $1.5 billion to the sector during 2003-2008.
Here's Express Tribune on rising sales of international global brands in Pakistan:
Faisalabad has historically been a city that conducted the manufacturing for global brands. Yet as the middle class in Pakistan expands, it appears that many of the city’s residents are affluent enough – or aspirational enough – to become consumers of those brands, resulting in booming sales for retailers and local franchisees of international brands.
Most of the sales of branded clothing and jewellery is taking place through franchises that have bought the right to sell these products to consumers in Faisalabad. The demand for these products is fuelled by the vast segment of the middle class that can afford to buy global brands but not necessarily to fly out to Dubai – or even to Karachi and Lahore – to buy them.
A series of interviews conducted by The Express Tribune, both amongst consumers and retail managers, suggests a voracious and growing appetite for branded clothing lines. And it seems that the economic slowdown has done nothing to decrease sales in this segment of the market.
“The higher income buyers of international brands never seem to get affected by economic disorder in the country,” said Sohail Safdar, a franchise manager for Charles & Keith, the Singapore-based company that sells its own brand of women’s shoes and bags. “Many of our buyers do not want to have to travel abroad to buy these products. That has created a boom in retail sales and led many retail franchise owners to think hard about expansion.”
“Sales of international brands keeps getting better and better and has begun to lure in even more brands,” said Syed Suleman Raza, a manager at one of the Nike franchises in Faisalabad.
The underlying cause of the trend seems to be a willingness by a large part of the Pakistani middle class to be willing to pay significantly higher prices for what they perceive to be higher quality. And given their longer durability, many branded products are seen as good value for money.
“Branded tend to be more and last two to three seasons,” said Sonia Razzaq, a shopper at one of the upscale malls in Faisalabad.
Nonetheless, prices are steep for many products, with shoes frequently costing Rs5,000 per pair or more. Jackets, shirts and women’s dresses go for even higher, commanding prices in the range of Rs10,000 or higher. These prices are well beyond the reach of most ordinary Pakistanis and yet a sizeable proportion of the population can easily afford them.
“Our customers are very brand-conscious and buy these products without any hesitation at the price tag or any attempt at bargaining,” said Sheikh Sultan, a manager at a franchise of The Body Shop, a UK-based cosmetics brand.
Here's a Businessweek story on Pakistan's informal economy:
It’s early morning in Karachi, Pakistan’s biggest city, and Muhammad Nasir is outside his makeshift shelter of palm leaves, rags, and bamboo, washing up after breakfast. He uses water stolen from a nearby supply pipe that belongs to the local water utility. The 17-year-old bids farewell to his mother, an unlicensed midwife, and walks to his tire-repair shop, an open-air stand in a residential area with a table of tools and a wooden bench. He checks to make sure the electricity he’s drawing illegally from the overhead power line is on so he can run his tire pump. Then he sends 10-year-old Abid, one of his two employees, along with 12-year-old Irfan, to get tea from a nearby shop.
Nasir’s business, his home, his power and water supply, and even the cup of tea Abid brings him don’t exist in Pakistan’s official figures. They’re part of another economy that doesn’t pay taxes or heed regulations. It probably employs more than three quarters of the nation’s 54 million workers and is worth as much as 50 percent of Pakistan’s 18 trillion rupee ($200 billion) official gross domestic product. And while the documented economy had its smallest expansion in a decade at 2.4 percent in the year ended June 2011, soaring demand for cars, cement for houses, and other goods shows the underground market is thriving.
the nation’s purchasing power is more than estimated, says Nadeem Naqvi, managing director of the Karachi Stock Exchange. Rising crop prices have pumped an extra 1 trillion rupees into the rural economy in the past four years, most of it undocumented, Naqvi says. He estimates agriculture may account for as much as 35 percent of GDP, instead of the 21 percent reported.
Evidence of consumer demand is everywhere as new shopping malls and restaurants in Karachi are filled to capacity. Car sales rose 14 percent in February from a year earlier, as more people could afford a Toyota Corolla or Suzuki Mehran (a small hatchback), according to the Pakistan Automotive Manufacturers Association. More than half a million motorbikes hit the road in the eight months ended February, a 5 percent increase, perhaps a sign that Nasir’s tire business has a bright future. ..
Here's a Business Recorder summary of packaged food giant Nestle Pakistan:
Nestlé Pakistan seems to be doing well in 2012.
The Companys financials for the first quarter ended March 31, 2012 show that the foods giant posted a profit after tax of Rs1.664 billion.
Nestlés product portfolio in Pakistan is truly diverse, which includes dairy products such as Milk Pak, Nido, Everyday and yogurts; beverages like Fruita Vitals, Milo and Nescafe; and food products like Maggi noodles, Cerelac, breakfast cereals, and confectionaries.
The Companys net sales crossed the milestone of Rs20 billion in 1QCY12, as the milk and nutrient businesses seem to be growing.
The competitive landscape has drastically changed for Nestlé Pakistan in recent years following the arrival of Engro Foods and strong performance of Unilever Foods.
Nestlé has had to deal with multiple competitors across various product lines; however, its consistent revenue growth shows that the size of the pie is expanding as the competition is penetrating deeply into the addressable markets.
Nestlés topline grew by a strong 24 percent during 1QCY12, but somewhat diluted by a larger, 25.4 percent increase in cost of goods sold.
Resultantly, these costs consumed 72.7 percent of net sales, and brought down the gross margin by 78bps compared to same period last year.
The spiraling prices of key commodity inputs (wheat and milk) along with the energy crisis continue to weigh heavy on the margins.
Nearly 15 percent increase is seen in the distribution & selling expenses, whereas the administrative expenses rose by a whopping 31 percent.
Nestle spent Rs12.53 on these two expense heads for every 100 bucks it earned in the quarter under review.
However, compared to the competition, Nestlés distribution & administrative expenses are controlled due to its vast network and economies of scale.
Nestlés non-operating performance is clearly an area that needs to complement the decent operating performance.
For instance, the finance cost jumped by a whopping 125.7 percent; the other operating expenses increased by 52.2 percent; and the other operating income decreased by 52.17 percent.
Healthy topline growth, coupled with somewhat controlled operating expenditures, ensured that Nestlé posted a double-digit profitability growth during 1QCY12.
Yet the net margin dropped by 93bps to come down to 8.24 percent, owing to the slippages mentioned earlier.
However, the profit of over 1,600 million rupees is sweeter still, especially for shareholders who earned Rs36.71 on each share during the period.
Despite the rising input costs and energy issues, Nestlé is well-placed to capture a bigger slice of Pakistans food market which is forecasted by various estimates to grow in double-digit in the coming years.
Services like Nestlé Professional - which markets food and beverage solutions for out-of-home establishments like restaurants, offices, airports, universities and hospitals - can also boost revenues.
Nestlé may be leading in many of the product lines it operates in.
However, the packaged goods share is still a fraction of the total market, and that is where the promise for sustained future growth lays.
Here are excerpts of a Bloomberg piece by Indian journalist Pankaj Mishra on Pakistan's "unplanned revolution":
However, I also saw much in this recent visit that did not conform to the main Western narrative for South Asia -- one in which India is steadily rising and Pakistan rapidly collapsing.
Born of certain geopolitical needs and exigencies, this vision was always most useful to those who have built up India as an investment destination and a strategic counterweight to China, and who have sought to bribe and cajole Pakistan’s military-intelligence establishment into the war on terrorism.
Seen through the narrow lens of the West’s security and economic interests, the great internal contradictions and tumult within these two large nation-states disappear. In the Western view, the credit-fueled consumerism among the Indian middle class appears a much bigger phenomenon than the extraordinary Maoist uprising in Central India.
Traveling through Pakistan, I realized how much my own knowledge of the country -- its problems as well as prospects -- was partial, defective or simply useless. Certainly, truisms about the general state of crisis were not hard to corroborate. Criminal gangs shot rocket-propelled grenades at each other and the police in Karachi’s Lyari neighborhood. Shiite Hazaras were being assassinated in Balochistan every day. Street riots broke out in several places over severe power shortages -- indeed, the one sound that seemed to unite the country was the groan of diesel generators, helping the more affluent Pakistanis cope with early summer heat.
Gangsters with Kalashnikovs
In this eternally air-conditioned Pakistan, meanwhile, there exist fashion shows, rock bands, literary festivals, internationally prominent writers, Oscar-winning filmmakers and the bold anchors of a lively new electronic media. This is the glamorously liberal country upheld by English-speaking Pakistanis fretting about their national image in the West (some of them might have been gratified by the runaway success of Hello magazine’s first Pakistani edition last week).
But much less conspicuous and more significant, other signs of a society in rapid socioeconomic and political transition abounded. The elected parliament is about to complete its five- year term -- a rare event in Pakistan -- and its amendments to the constitution have taken away some if not all of the near- despotic prerogatives of the president’s office.
Political parties are scrambling to take advantage of the strengthening ethno-linguistic movements for provincial autonomy in Punjab and Sindh provinces. Young men and women, poor as well as upper middle class, have suddenly buoyed the anti-corruption campaign led by Imran Khan, an ex-cricketer turned politician.
After radically increasing the size of the consumerist middle class to 30 million, Pakistan’s formal economy, which grew only 2.4 percent in 2011, currently presents a dismal picture. But the informal sector of the economy, which spreads across rural and urban areas, is creating what the architect and social scientist Arif Hasan calls Pakistan’s “unplanned revolution.” Karachi, where a mall of Dubai-grossness recently erupted near the city’s main beach, now boasts “a first world economy and sociology, but with a third world wage and political structure.”
Even in Lyari, Karachi’s diseased old heart, where young gangsters with Kalashnikovs lurked in the alleys, billboards vended quick proficiency in information technology and the English language. Everywhere, in the Salt Range in northwestern Punjab as well as the long corridor between Lahore and Islamabad, were gated housing colonies, private colleges, fast- food restaurants and other markers of Pakistan’s breakneck suburbanization....
Here's a <a href="http://www.thenewstribe.com/2012/04/23/ian-james-donald-md-nestle-leaving-pakistan/>news story</a> on progress made by outgoing MD of Nestle Pakistan:
<i>Karachi: Ian James Donald Managing Director Nestle Pakistan is likely to be deputed from Pakistan to other country after one year and eight months of his successful service in the leading nutrition country.
Ian J Donald has been Managing Director at Nestle Pakistan Limited since September 1, 2009. He was deputed from Nestle Malaysia Bhd where he served as a Director of Ice Cream, Chilled Products & Associated Businesses.
Under his leadership, Nestle Pakistan succeeded in delivering robust financial results despite the economic slow down and flood crises in the country, which hit livestock sector and affected productions channels of the company.
The leading FMCG company announced good results heralding a prosperous year and sound financials backing its many initiatives.
The profit and revenues witnessed handsome growth from 2010 to 2011 under his tenure as the profit of the company up by 56.6 percent and revenues increased by 58 percent.
Nestle Pakistan profits and revenues stood at Rs 4.7 billion and Rs 64.8 billion by 2011 as compared with profits and revenues recorded in 2010 at Rs 3 billion and Rs 41 billion.
The business profitability and strategy had been successful in the past two years as the company was witnessed as one of most preferred one in equity market. It share value was stood at Rs 66.27 in 2010, which went to Rs 102.94, showing 55 percent growth.
Managing Director Ian Donald – a South African national who has been with the global parent company for 40 years – has focused on expansion of Nestle business primarily by growing the packaged foods market.
Nestle already has a gigantic infrastructure in Pakistan. The company collects milk from over 190,000 farmers spread out over an area of about 145,000 square kilometers.
Donald believes that the strategy of value addition in existing brands rather than adding newer brands in the market. Besides, his contribution was immense in sales expansion in the rural market, which he believes a driving factor for promoting business and standards of masses’ lives.
The outing MD of Nestle, a Swiss company, has made a three years business expansion plan of Rs 320 million Swiss Francs in its presence in Pakistan’ rural and urban markets.</i>
PSMC to post PAT of Rs413mn (EPS 5.02), up 351% YoY, 237% QoQ, reports Investorguide360.com
The company is expected to announce PAT of Rs413mn (EPS Rs5.02) in 1QCY12, up by a massive 351% YoY. The gigantic rise in the profitability is mainly due to 31%YoY increase in unit sales coupled with 9%YoY increase product prices. Moreover, the other income of the company is also estimated to have helped in boosting up the bottomline of the company as it registers a healthy growth of 49%YoY to Rs196mn in 1QCY12. In the light of historical payout trend, we do not expect any cash dividend from the company with the results.
Company’s bottomline is also expected to jump 237% on QoQ basis due to 23%QoQ primarily due to increase in company’s sales volumes. As the customers prefer to book vehicles with the new year registration, therefore, during the last quarter company’s unit sales remained dull. As such, the other income of the company is also expected to decline (income comes from the customers’ advances).
At current levels, the company scrip is trading at a PE of 5.5x and 6.1x based on CY12 and CY13 earnings estimates, respectively. We recommend ‘Buy’ on the scrip with our revised Jun-12 target price of Rs92/share.
Here's an ET story on Engro supply chain in Pakistan:
Have you ever wondered where the milk in packaged dairy products comes from? In case you assumed that big food companies maintained their own dairy farms that generated thousands of litres of milk daily and remained insulated from fluctuations in open market rates, you are wide of the mark.
In fact, only 5% of about 1.2 million litres of milk that Engro Foods collects every day for its dairy segment during the flush season – from January to April each year when fodder is available in abundance and milk production is high – comes from its own corporate farm located in Sukkur.
The rest of the milk supplies during the flush season and the summer, when milk production drops by roughly 50%, comes from about 15,000 small farmers scattered between Sanghar and Jhang districts, an area of 135,000 square kilometres.
Streamlined under Engro Milk Automation Network (EMAN), Engro Foods maintains a sales force of 1,500 people across 1,200 villages in Sindh and Punjab. They collect milk, mostly in small quantities, from farmers between 6:00am and 9:30am every day, which is then transported for further processing.
But why would a villager with just a few cattle sell the excess quantity of milk to Engro Foods instead of the traditional milk contractors known as dodhis?
According to Aamir Khawas, who works as head of milk procurement and agri services at Engro Foods, doing business with a large food company offers small farmers a number of benefits. “Animals are susceptible to diseases. Our network of veterinarians ensures sick animals receive immediate treatment. That’s a benefit no traditional milk contractor can offer,” he said.
Moreover, the moment a farmer sells milk to an Engro representative, in whatever small quantity, the transaction is recorded electronically in a centralised database by swiping the EMAN card that each of the 15,000 suppliers carries.
The availability of real-time data ensures that money is transferred to the farmer the day the transaction takes place. This is in contrast to the past practice of issuing receipts on paper that took at least a week before a transaction was recorded and payment processed.
In addition, Engro’s advisory service helps farmers increase milk production. “There’re two ways for a farmer to increase his revenue. If he gets Rs41 instead of Rs40 per litre, his revenue increases by Re1. But if the milk output increases by one litre, his revenue increases by Rs40. We help him do the latter,” Khawas said.
So how does Engro ensure that the milk is pure? “It’s very easy. We pay farmers not on the litres of milk they bring to us. Rather, the basis of payment is total solid contents of the milk,” he said, explaining that milk consists of three things – water, fat and solid non-fat (SNF). Total solid contents are the sum of fat and SNF.
“It’s hard to adulterate when the quantity is low. So no matter how much water you add, the solid contents can easily be determined by running a few tests,” he said.
A total of 13 tests are carried out when a farmer hands over milk to an Engro representative. It is picked up from there by an Engro van that carries out another 20 tests on the collected milk. It then reaches the regional office where 30 more tests are done to check its quality. Eventually, milk is taken to the Engro plant where the final 40 tests take place before it is processed, packaged and dispatched to the retail market.
With the demand of milk increasing by 15% annually and supply rising by just 2% a year in Pakistan, the dairy sector looks like a heaven for investment. The Sukkur farm of Engro Foods has already grown 10 times since its inception with about 3,000 cows. “Yet we’re looking for a major expansion in the near future.”
Here's a report on rising auto & tractor sales in Pakistan:
As per the latest available data of auto sales, recently released by the Pakistan Automotive Manufacturers Association (PAMA), car and LCV sales witnessed a 15.1% YoY growth in 11MFY12. Segment-wise break-up reveals that the economy segment (less than 1,000cc) led the growth with sales increasing by 24.9% YoY during the period under review. This was followed by the 1,000-1,300cc segment, which witnessed sales growth of 19.2% YoY to 26,734 units. The high-end segment (1300cc+) meanwhile remained the sector’s laggard and sales grew by a meager 2.1% YoY to 58,458 units. This lackluster performance can mainly be attributed to the suspension of production at Honda Atlas Car’s (HCAR) plant from Dec-11 to Mar-12, and single-digit sales growth of Corolla. Sales of LCV’s and 4×4’s registered a healthy 27.4% YoY growth in 11MFY12, mainly due to a jump in Bolan (PSMC), Ravi (PSMC) and Hilux (INDU) sales.
Pakistan Suzuki Motor Company Limited (PSMC) witnessed a 31% YoY improvement in sales in 11MFY12 to 100,805 units. PSMC has benefitted from the Punjab Government’s Yellow Cab Scheme, which has resulted in sales of Mehran and Bolan to increase by 39% YoY and 54% YoY respectively. Sales of Swift, Cultus and Alto meanwhile, increased by 67% YoY, 23% YoY and 15% YoY respectively in 11MFY12. Total units sold by the company in May-12, increased by 20% MoM to 10,608 units. On a YoY basis, this figure is 34% higher than May-11’s sales of 7,920 units.
Sales of Indus Motor Company Limited (INDU) decreased by 7% MoM in May-12 to 4,846 units. The primary reason behind this decline is the discontinuation of Coure, with only 63 units being sold during the month. During 11MFY12, the company sold a total of 48,907 units, which is 6% higher on a YoY basis. Hilux has remained at the forefront (with respect to sales growth), and its sales are higher by 56% YoY to 3,625 units in 11MFY12. Sales of Corolla during 11MFY12 increased by 9% YoY to 41,720 units.
Honda Atlas Cars Pakistan Limited (HCAR) reported a 53% MoM increase in total units sold to 1,150 units. The company’s endeavors to clear the backlog of orders of its City model resulted in sales of the model to jump by 533% MoM to 1,050 units. In 11MFY12 however, the company was only able to sell 9,901 units (33% lower YoY) owing suspension of production due to floods affecting its primary parts supplier in Thailand last year.
Al-Ghazi Tractors Limited (AGTL) registered a healthy 20% MoM sales growth to 2,743 units in May-12, helping the segment attain an overall performance improvement of 10% MoM to 6,913 units. On a YoY basis however, the sector recorded 33% lower sales owing to the imposition of GST last year, which resulted in demand for the product drying and production being suspended as a consequence. Millat Tractors Limited meanwhile, reported a 4% MoM improvement in sales to 4,170 units. On a YoY basis, sales of AGTL and MTL declined by 42% and 28% respectively during 11MFY12. This was mainly on account of the suspension of production mentioned above..
Here's an LA Times story on gated communities in Pakistan:
Reporting from Rawalpindi, Pakistan — The houses and manicured lawns slope up the artificial hill edged by unbroken sidewalks and white picket fences, as children play and residents exchange pleasantries.
This sprawling subdivision called Bahria Town — "Come home to exclusivity," it boasts — operates its own garbage trucks, schools, firehouse, mosques, water supply and rapid-response force — a kind of functioning state within a nonfunctioning one. And all supplied without the bribes you'd pay on the outside, residents say.
"I like living here," said Abdul Rashid, a sixtysomething retired government worker. "It's like you're in a little protected country — tidy, utilities work, the family can relax. If there's any problem, you just ring up security."
The jarring presence of a middle- and upper-class retreat in this increasingly violent nation has been paved, in part, by the involvement of the country's powerful military. Benefiting from laws put in place during British Empire days to reward friendly armies and militias with land grants, the military now controls about 12% of Pakistani state land, by some accounts. And its privileged position allows it to partner with and otherwise route valuable tracts to favored developers.
Bahria Town and its partner, the military-run developer Defense Housing Authority, occupy twice as much land as Rawalpindi, the garrison city 30 minutes from the capital, Islamabad.
In the posh Safari Villas subdivision, past Sunset Avenue and College Road, Mohammad Javed, 69, surveys his pocket garden before heading into his three-bedroom corner house with a beige sofa ensemble and Samsung flat-screen TV. Houses in the neighborhood run from $25,000 to $60,000, well out of reach of most Pakistanis.
Bahria Town has been a hit not only with moneyed Pakistanis but also with returnees. Javed, who owned a gas station in Canada before retiring, hopes to replicate his North American lifestyle. Bahria's protective walls bring security, he said, although he still won't let his grown children visit lest something bad happen beyond its confines. "We meet in Thailand or Canada," he said.
"No one besides the military has such access," she said. Bahria Town advertised on a recent Sunday for retired major generals and lieutenant generals to fill positions at the company, Siddiqa said: "These are his keys" to greater access.
But for resident and food industry entrepreneur Shaheryar Eqbal, these are minor issues relative to what Bahria Town delivers.
"The government should take these communities as a model and replicate them," he said. "The army already has a joint venture with Bahria Town. Things work. Pakistan must get through this terrorism phase, but this could really be the future."
Here's an ET story about rising middle class consumption in Pakistan:
It is the paradox that puzzles everybody: the headline numbers indicate an economy in an abysmal state, but everywhere one looks, there are people shopping like there is no tomorrow. How is this possible? An analysis conducted by The Express Tribune reveals a surprising answer: women.
While the headline GDP numbers suggest sluggish economic growth, not all sectors are underperforming. A closer look suggests that the economic slowdown has been far from uniform, with some sectors booming, while others are in a deep slump. The retail and wholesale sector in Pakistan was worth about $40 billion in fiscal year 2012, and has been growing at 5.3% in real (inflation-adjusted) terms for the past five years, much faster than overall economic growth during that period.
And the benefits of this growth have been visible throughout the country. While large shopping malls opening up has become common place in cities like Lahore and Karachi, national newspapers now carry advertisements for shopping malls in smaller cities like Dera Ghazi Khan, Sukkur, Sargodha, etc as well. The average Pakistani household is very clearly more able and more willing to shop than ever before.
The reasons for this newfound consumerism are complex. Despite all the complaints about inflation, household incomes for Pakistanis in urban areas rose faster than inflation by an average of about 1.5% per year between 2006 and 2011, a period of extraordinarily high inflation rates. (Rural Pakistan did not fair quite as well.) The average household size also fell during that period, further raising per capita gains....
The reasons for why women have entered the workforce are manifold. Education levels have been rising rapidly across the board. Fertility rates have dropped from 7.1 in 1980 to just over 3.1 in 2011, causing household sizes to decline. Women with fewer children have more freedom to pursue careers outside the home.
And persistently high inflation may also have forced many families to consider being more open to women working outside the house: a second income can clearly go a long way in changing the fortunes of a household. It has clearly already helped the economy through a particularly difficult time.
Here's an ET report on potential GM investment in Pakistan:
The Adviser to Prime Minister on Industries Muhammad Basharat Raja said that talks were held with delegations of Korean Company and General Motors (GM) to motivate them to invest in Pakistan and he hopes for positive results.
Raja told the National Assembly that the government is considering giving more incentives for investment in car manufacturing in the country. He added that presently one hundred and fifty thousand cars are being manufactured in the country and fifty thousand are being imported annually which are not sufficient to meet requirements.
General Motors, the world’s largest automaker based on sales has brands like of Cadillac, Chevrolet, GMC, Opel and Vauxhall under its belt. In Pakistan, General Motors markets its products through Nexus Automotive Limited, the exclusive importer and progressive manufacturer of the automaker’s products in the country. Nexus started manufacturing Chevrolet Joy in Pakistan in December 2005 whereas other GM products sourced from the global GM network are also planned for introduction to the local market. Nexus uses idle capacity at the Ghandhara Nissan Limited plant at Port Qasim to assemble Chevrolets, under the GM contract assembly agreement.
The project estimated value is $15 million and GM-Chevrolet has provided full support to ensure that the local components and the car assembled here meet GM quality standards and customer expectations.
Auto sales in fiscal 2012 stood at 157,325 units according to the data released by the Pakistan Automotive Manufacturers Association. In terms of car sales, Pak Suzuki Motor Company is leading with 95,142 units followed by Indus Motor Company and Atlas Honda.
Here are excerpts of PakistanToday's interview with Pepsico Asia chief Qasim Khan:
.. In a recently-conducted detailed interview with Pakistan Today (PT), Qasim Khan, a US-educated Pakistani who is PepsiCo’sgeneral manager and president for the North and South Asia Business Unit that, in its scope, ranges from Japan to Mongolia, talked at length about the immense potential as well as challenges the MNCs like his own are presently facing in Pakistan.
What is the current size
and scope of your business in Pakistan?
Qasim Khan: PepsiCo International is intricately linked towards the development of the corporate sector in Pakistan as we were one of the first multinationals to start operations in Pakistan in 1967. Now we are the biggest Food and Beverage Company in terms of the retail turnover in Pakistan having seven beverages franchises across the country. We also brought in Foreign Direct Investment in the shape of a concentrate plant set up in Hattar. Today, Pakistan is the 6th largest market for PI worldwide and we have three brands; Pepsi, Dew and 7-UP which are bigger than our rivals in terms of volume contribution. Pepsi is ingrained as a household brand while our contributions towards the development of sport, specifically cricket and music industry is unparalleled. We have been the pioneers of developing both these industries while strengthening our beverages brands over the past many decades. Since 2006 we also introduced the famous Lay’s potato chips brand in Pakistan by investing in a state-of-the-art plant which employs over a 1000 people. We have made strong investments in the agricultural sector of Punjab by introducing latest technologies for potato growers and are looking to expand potato growing into the country’s northern areas. We also plan to export potatoes to other countries around the world. Our snacks portfolio consists of leading global brands like Lays, Cheetos, Kurkure and Wavy.
PT: OK, now tell us what made PepsiCo invest in Pakistan?
Qasim Khan: Pakistan’s opportunity is driven from the following facts:
Large Market: It’s the 6th most populace country in the world with approximately 70 percent population under the age of 30.
Trained Workforce: A large trained and productive population represents a big opportunity to Pakistan to benefit from its demographic dividends.
Investment Policies: Pakistan’s policy trends have been consistent with liberalization, de-regulation, privatization and facilitation being the cornerstones of its policy.
Large Agro Base: The strong agriculture base presents a great opportunity for our food business to expand in the future. We realize that Pakistan is the 11th largest wheat producer, 12th largest rice producer and the 5th largest milk producer in the world.
Geo-Strategic Location: It can be a gateway between the energy rich Central Asian states, the financially-liquid Gulf states and technologically-advanced Far Eastern countries. This alone makes Pakistan a market teeming with possibilities.
Incomes on F&B: A significant amount of individual incomes (as high as 40 percent) are spent on food and beverage representing a huge opportunity for the industry.
Financial Markets: The capital markets are being modernized, and reforms have resulted in development of improved infrastructure in the stock exchanges of the country. The Securities and Exchange Commission of Pakistan has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector....
Here's a Bloomberg story on Pakistan seeking US investments:
The American Business Council, that includes the Pakistan units of Coca-Cola Co. and Cisco Systems Inc., plans to invite 10 U.S. companies a year to invest in the South Asian nation and take advantage of rising consumer demand.
“Branded product penetration in Pakistan is so low that the potential for growth is immense,” Saad Amanullah Khan, president of the council, said in an interview in Karachi today. Up to 80 percent of American companies operating in Pakistan, especially technology and consumer goods companies, had a “good year” in 2011.
Pakistan needs to increase overseas investment to help meet an economic growth target of 4.3 percent in the year that began July 1. Foreign direct investment declined 50 percent to $813 million in the year ended June 30, according to the central bank.
The council plans to double its membership of U.S. companies from 63 in the next five years and increase the total investment to $1 billion from $663 million, said Khan, 51, who is also chief executive officer of Gillette Pakistan Ltd.
Pakistan agreed this month to end a seven-month ban on North Atlantic Treaty Organization trucks crossing its territory on the way to Afghanistan, easing tensions with the U.S., its biggest trading partner. The routes were reopened after U.S. Secretary of State Hillary Clinton apologized for the killing of 24 Pakistani soldiers in a November border strike by American helicopters.
Pakistan’s credit rating was lowered deeper into junk status by Moody’s Investors Service on July 13, which cited dwindling currency reserves and political instability. The $200 billion economy faces the fastest inflation in Asia, lingering power blackouts, an insurgency on the Afghan border and reduced aid flows.
Here's a Bloomberg story on rapidly rising sales at Engro Foods:
Engro Foods Ltd. (EFOODS), Pakistan’s biggest maker of packaged milk, may record an 80 percent increase in net income this year as demand for dairy products rises, the chief executive officer said.
Profit may cross 1.6 billion rupees ($17 million) in the year ending Dec. 31 compared with 891 million rupees a year earlier, Muhammad Afnan Ahsan said in telephone interview from Karachi yesterday. Net income rose to 531.8 million rupees in the three months ended June 30, from 99.2 million rupees a year ago, the Karachi-based company said in a filing to the stock exchange yesterday.
Engro Foods, which has a 45 percent share of the milk market and a quarter of the ice cream trade, may introduce as many as 13 new products and lines, Muhammad Aliuddin Ansari Chief Executive Officer of Engro Corp., the parent company, said in an interview this month. The food business may become the largest segment by profit and sales and will be the dominant area in the next five years, he said.
Engro Foods, which has climbed threefold this year, compared with a 20 percent gain in the benchmark KSE100 index, increased as much as 1 percent to 67.83 rupees at 9:33 a.m. local time
Here's a PakTribune report on new plant for producing BOPET for packaging of FMCG products in Pakistan:
Novatex Limited has successfully commissioned a project to produce Biaxially Oriented Poly Ethylene Terephthalate (BOPET) film.
This is a pioneer industry for Pakistan, bringing in technology and machinery, which is so far non-existent in the country.
Habib Bank Ltd, United Bank, Faysal Bank and Standard Chartered financed this project and the plant commenced operations in June 2012.
BOPET Polyester film, which will be produced by Novatex, has due to its superior attributes become a necessary packaging material for food, etc allowing the introduction of strong aroma retention and beautiful printed small as well as bulk pouches for tea, ketchup, mayonnaise, salad dressings, spices, fruit and vegetables packaging, food pastes as well as milk powder, good quality biscuits/snacks washing powder and shampoos, etc.
The current consumption of BOPET in Pakistan is over 16,000 tonnes and it will cross 20,000 tonnes following its availability locally.
Pakistan will become self sufficient in BOPET polyester film and save import of $40 million besides will generate export in excess of $30 million.
BOPET polyester film is also used for LCD/LED TV panels, solar panels, cable interior, salma sitara type decorations and x-ray film.
The project of Novatex has been set up with the latest German technology supplied by Lindauer Dornier of Germany.
It has a capacity to produce 31,000 tonnes BOPET per annum with 8.7 metre width and is the largest capacity and width currently available in the world for BOPET film lines.
Pakistan auto sales rose 23% in FY 2011-12, reports The Nation:
The Pakistan car industry grew by 23% to 178,753 units YoY in FY12 where PSMC contributed 60% followed by INDUS contributing 29% to the total industry sales. The increase can be attributed primarily to 1) good agricultural income 2) deferred sales due to reduction in Sales Tax and 3) Yellow cab scheme.
In Jun12,car sales stood at 19,140 units, depicting an exceptional increase of 158% from 7,419 units sold in Jun11 mainly because of the low base effect as the government was expected to reduce Sales Tax by 1% in Jun11.
PSMC had a phenomenal FY12 as it witnessed a 40% YoY jump in its sales figures contributing more than 50% to the industry’s total sales pie. This growth in units from 79943k to 112157k units was mainly triggered by Punjab Government Yellow cab scheme where PSMC was the prime beneficiary.
INDU also saw its sales units go up to 54477 units from 50015k (9% up in FY12) on the back of good agricultural growth and subsequently good rural income.
Segment wise YoY analysis makes Corolla(+58%), Cultus(+ 20%) and Mehran(+ 46%) the star performers in 1300cc, 1000cc and 800cc respectively. We believe Corolla on the back of agricultural income and Cultus and Mehran as substitutes to Alto and Cuore will continue to capture the customer interest.
Auto sales in June-2012 clocked in at 19.2k units, which is an increase of 15%MoM. This improvement in sales is most likely due to anticipated price hikes by the manufacturers owing to conversion to Euro II compliance and steep depreciation of Rupee. On a YoY watch, auto sales soared by 155%.
However, this growth is misleading as sales last year in June abnormally declined owing to expectation of price cuts. As a result, auto sales reached 179k units (up 22%YoY) in FY12 vs. our expectation of 175k units. In expectation of stiff competition from imports, we expect growth to slowdown to 6% in FY13. We presently have a ‘Market-Weight’ stance on the sector, with Indus Motor (INDU) as our preferred play.
FY12 culminated with a growth of 22%YoY, with sales touching 179k units. The improvement in demand was largely led by the subsidized Yellow Cab scheme offered by the Punjab government. We expect the growth to slow down to 6% in FY13 (sales likely to reach 190k units) owing to a lower amount allocated to the cab scheme this year and stiff competition from imports.
The announcement of a new long term auto policy (termed as AIDP-2) will be pivotal for the sector going forward.
Significantly lower duties on CBU imports in the policy can substantially hurt the local manufacturers. We retain our outlook on the sector at ‘Market-Weight’, with INDU as our preferred play. The stock trades at an FY13 PE of 5.8x, and offers a dividend yield of 7.4%
Here's an ET report n Toyota's rising sales and profits in Pakistan:
Global automobile giant Toyota’s affiliate in Pakistan announced that the 2012 financial year was its most profitable ever in the country, earning Rs4.3 billion in net income, a 57% increase over the previous year.
Indus Motor Company – a company that is 37.5% owned by Japan’s Toyota – announced its annual results on Thursday. The company’s revenues rose by nearly 25% to reach Rs75 billion, largely on the back of increased car sales, though higher prices were also a factor. The company sold over 55,000 cars during the financial year that ended on June 30, 2012, its highest ever for a single year. Both revenues and profits were the highest in the company’s history in Pakistan.
Investors in Indus Motors are likely to be pleased by the management’s decision to announce a Rs24 per share dividend, bringing the total annual payout to Rs32 per share. Given the company’s earnings per share of Rs54.74, that comes to a payout ratio of 58.5%.
Indus Motors assembles the Toyota Corolla, easily the most popular sedan in the Pakistani market, made even more attractive by the company’s wide network of dealerships and after-sales service points, which help the car retain a high resale value. As incomes in Pakistan’s urban middle class have recovered after the 2008 financial crisis, sales of the sedan have bounced back to pre-crisis levels.
Nonetheless, analysts point to several dangers to the company’s business. “Demand for new cars in Pakistan will decline, going forward,” said Atif Zafar, a research analyst at JS Global Capital, an investment bank. “Local car manufacturers are expected to remain under pressure from competition with imported used cars.”
Nonetheless, sales figures for new cars have been improving, reaching a four-year high of over 157,000 units in 2012, an almost 23% increase over the previous year. Indus Motors share of that is almost 35%.
Officials at Indus Motors concurred with JS Global’s assessment that new car demand had slowed in recent weeks, largely due to an expectation among car buyers that the government will relax rules on the import of used cars. Low demand is forcing local manufacturers to cut back on production, they said. Indus suspended its production for four days in July and plans six off-days in August to offset the problem of slow demand.
The largest carmaker of country, Pak Suzuki Motors, is also expected to see a hit in its sales this year. This year, the Punjab government has allocated fewer funds for the Punjab taxi scheme so one can expect that Pak Suzuki may get less orders compared to last year’s order of 20,000 units, Zafar said.
While car importers vow to double car imports this year, local carmakers are continuously pressuring the government to reduce the age-limit of used car imports from the current five years to three years. Pakistan imported 55,000 cars in fiscal year 2012, a massive increase over the 18,000 cars in previous fiscal year.
Here's Wall Street Journal on slowing car sales in India:
NEW DELHI–Local car sales in India rose 6.7% in July from a year earlier when they dropped, and the local group of auto makers said Thursday it is still worried about a slowing economy, higher interest rates and waning demand for gasoline-run vehicles.
Car sales in Asia’s third-biggest economy climbed to 143,496 units in July from 134,473 a year earlier, according to data issued by the Society of Indian Automobile Manufacturers, or SIAM. The growth is despite half of the 18 car makers in the country posting a drop in sales in the past month.
In the year-earlier month, sales fell 16%–that was the first sales drop in nearly three years–partly due to lower production at the country’s largest car maker by sales, Maruti Suzuki India Ltd., caused by a labor unrest at its plant in the northern Indian town of Manesar.
The same plant at Manesar has been shut since July 18 this year after a riot by workers that led to the death of a senior manager and injured more than 100 people. The company has yet to announce a date for reopening the factory.
“This month’s (July) growth is on a very very low base due to Maruti’s strike last year,” Vishnu Mathur, director general of SIAM told reporters. “This year, they (Maruti) had stocks and somewhat managed (supplies), even though there is a lockout. We would start seeing some impact of Maruti’s lockout from this month onward.”
Maruti, the local unit of Suzuki Motor Corp., sold 56,851 cars in July, up 8.3% from a year earlier. In addition to the Manesar plant, the company has a factory at Gurgaon, also in northern India.
A faltering economy that has weakened customer sentiment has been taking a toll on car sales in India for several months.
Sales have also been hit by higher interest rates that have made loans costlier and falling demand for gasoline-run models as the fuel is costlier than diesel. For instance, a liter of gasoline costs 66% more than diesel in New Delhi.
Car makers have been offering discounts on gasoline models to attract buyers.
The automotive association in June cut its forecast for car-sales growth to 9%-11% in the current financial year through March from the 10%-12% projection given in April.
During April to July this year, local car sales grew 5.6% to 634,298 autos.
Hyundai Motor Co., the second-ranked car maker in India, sold 27,500 cars in July, an increase of 7.8%. Sales at Tata Motors Ltd. rose 51% to 21,153 cars.
However, sales at the Indian units of Toyota Motor Corp., Ford Motor Co., General Motors Co., Honda Motor Co., Volkswagen AG, BMW AG, Fiat SpA and Daimler AG’s Mercedes-Benz declined in July.
“Overall, the sentiment continues to be extremely weak,” SIAM’s Mr. Mathur said. “Sales have been growing only because of diesel, and some gasoline models are selling because of discounts.”
Here's an ET story on Naya Mazimabad, a new gated community in Karachi:
After many years in Karachi, a housing society was launched on Friday for people who may want to escape the commercialisation of their neighbourhoods but cannot afford to buy pricier property in say DHA, PECHS or Mohammad Ali Housing Society.
Naya Nazimabad City, a project of stockbroker and businessman Arif Habib, is located at a drive of 20 minutes from Water Pump Chowrangi in Federal B. Area. Another big broker, Aqeel Karim Dhedhi, has also put his weight behind the project.
Naya Nazimabad’s sponsors want to outdo Defence Housing Authority (DHA) and Bahria by completing the project in time.
“We are not targeting the people who live in Defence or Bath Island,” said Ovais Sohail, the project manager. “Our clientele will come from Gulshan, New Karachi and Nazimabad.”
The project will be developed in phases with the first one to be finished by 2015. “This entire city will take ten to eleven years to complete.”
Sponsors have hired around 150 personnel of the Frontier Constabulary for security of the project, which is located near the violence-prone Qasba Colony and between Pukhtunabad and Baloch Goth. The number of FC guards will be increased once residents move in, an official said.
Naya Nazimabad, with hills on one side and Manghopir Lake on the other, will house 300,000 people in single-storey units and flats. Since the development of the homes depends on demand, developers were unable to say exactly how many houses will be built.
Hospital, schools and markets are part of the project.
Naya Nazimabad will have its own bylaws. “It’s not like you can buy the plot and construct whatever type of house you feel like,” said Sohail. “The bylaws need to be followed. We will continue to work as the administrator.”
A single-storey house covering 160 square yards is being offered for 3 million rupees, with a 1.2 million-rupee debt component.
The chairman of AKD Securities, Aqeel Dhedhi, said that the project drew on inspiration from the Askari and Navy Housing Scheme projects. “There are no gated societies in Karachi,” he claimed. “Naya Nazimabad will have gates on all three societies that will be properly guarded."
According to him, a well-developed society needs over 1,000 acres of land. “Getting that in Karachi is near-impossible. The city stands divided on ethnic lines. And for all those schemes coming on the Super Highway, security remains a concern.”
Naya Nazimabad is spread over 1,200 acres, most of which belonged to Javedan Cement plant, a company of the Arif Habib Group.
While manager Ovais Sohail was sure that they would be able to provide basic amenities, a lot of questions need to be answered. Karachi’s water utility is under increasing criticism for failing to meet the needs of tens of thousands of people. How would it ensure a supply to Naya Nazimabad? Sohail explained that it helped that they are located right near Hub, the dam from where Karachi gets its water. “Both the main supply conduits pass near the project,” he added. “And I don’t see any reason for us to be denied the supply.”
Here's an ET report on Emaar Alma Townhomes project in Islamabad:
With Spanish and Portuguese architectural designs, imported electrical and sanitary fittings, ironmongery for doors and design-fitted kitchens, Alma Townhomes offer dream homes for those wanting to invest in real estate.
The second phase of the housing project, that was opened for buyers by international real estate developer Emaar on Saturday, saw a large number of potential home owners from twin cities showing up. The two-day event is being held at a sales centre inside Emaar’s 400-acre gated community — Canyon Views.
Situated on the Islamabad Highway near the Grand Trunk Road (DHA Phase-II Extension), the Alma houses target a major segment in the housing market – end users who are looking for an “affordable” house in a safe and sustainable community, according to Emaar Pakistan Head of Development and Projects Shairyar Salim. The company has completed the first phase, which is fully occupied.
The earthquake-resistant housing units, which occupy eight to 12 marlas and have three to four bedrooms, start with a price of Rs14 million, which is slightly high compared to Bahria Town’s Safari Villas and Defence Housing Authority (DHA). A 10-marla house Safari Villas and DHA cost Rs12 million and Rs11.5 million on average respectively, according to a Rawalpindi-based real estate agent Waseem Kiyani.
He said that a ready-made house on 10 marlas in Bahria Enclave can cost around Rs15 million with a one-year payment plan.
Facilities at these housing projects seem comparable, although Salim believes Emaar’s designs are more “advanced”, as they draw on the developer’s experience of making international housing projects.
The Alma Townhomes might also have a superior security apparatus. The integrated community has a three-tier security plan which includes two outer boundary walls and a security patrol on the streets.
“With Emaar, you’re confident that your money will not go down the drain,” said Asif Akhtar, a resident of the Alma Townhomes Phase-I who works for the Army Welfare Trust.
“They deliver on their promises, and their quality of construction and services are simply amazing,” he added.
The houses will be made available under a two-year payment plan and the construction is expected to be completed within that time frame, said Emaar Pakistan Head of Sales and Marketing Uzair Adil.
According to Salim, houses in Phase-I were quick to sell out and a similar response is expected from the second phase. The new community will also have access to facilities that were constructed for the first phase, such as a school and markets.
“The advantage of Phase-II is that the infrastructure is already present and the roads are almost complete,” he added.
Salim went on to explain that the houses will be built in groups of 50 to 60 units, with each group having a park, play area and BBQ area. Plans to build a hospital, shopping malls, community club houses and mosques are also underway.
Shaukat Zia, a civil engineer from Rawalpindi, who was present at the launch with his family, seemed quite impressed after being briefed about the project.
However, he was concerned about the investment, saying that a house in the townhomes seemed only feasible for the elite.
Salim said Emaar is looking to sell around 150 units in the first batch, which is approximately one-third of the total units.
Emaar Pakistan has invested over $2.4 billion in the country since 2007, according to information available on its website.
Here's a BR piece on Colgate Palmolive Pakistan:
Colgate Palmolive Pakistan, one of the leading manufacturers of personal care and consumer products in the country, began its operations back in 1985 when the US granted the firm license to manufacture and market Colgate Palmolive products in Pakistan.
Currently, the firm is engaged in the production and marketing of some of the leading international brands of oral and personal care products, bringing a few of the world's most trusted household names such as Colgate Toothpaste and Palmolive Naturals to the Pakistani market.
Working under the umbrella of the Lakson Group, the company boasts of 450 distributors across the country and has been a KSE top performer, being listed amongst the Top 25 best performing companies for seven years straight as of 2012.
Financial highlights The company's accounts ended 30th June saw its Net Profits go through the roof, managing a 38.7 percent increase to top off Rs 1.6 billion versus Rs 1.17 billion recorded last year on account of a hefty top-line growth that saw sales climb by 28.6 percent year on year.
The steady growth in revenue, which amounted to Rs 18.71 billion- up from Rs 14.15 billion in the last year-came mainly off the back of the firm's well spent money devoted to advertisement and distribution as well as through effective in-store promotions which allowed the relevant brands to achieve steady volume growth thorough out the year.
The company managed to retain profitability as a result of their ongoing cost-saving initiatives which enabled to offset the exorbitant input prices hindering most other manufacturers. Consequently, the firm also made small price adjustments across various products to pass on the rising costs of packaging and raw material to the consumers, thereby ensuring that the Gross profit margin only saw a small decline, going down to 28.92 percent as compared to 29.40 percent.
However, despite the fact that the rising input prices dampened the firm's stellar top line growth somewhat, Colgate continued to steadily increase its overall spending on sales promotion which has been mainly responsible for the propagation of the company's sales volumes. Overall, the media and promotional spending increased by 43 percent, going up to Rs 1.6 billion as compared to Rs 1.1 billion spent during the same period last year.
The year-end also saw Colgate's financial position improve as the firm's cash and cash equivalents increased by 35.3 percent, signing off at Rs 840 million, up from Rs 620 million recorded during last year.
Key operational highlights In the previous quarter, Colgate Palmolive Pakistan had launched "Brite Anti Bacterial Detergent" powder, which was the first such product in the Pakistani market. Marketed as a detergent with a unique germ-busting formula, this latest innovation was hailed positively by the consumers. The product continued to strengthen Colgate's equity during the last leg of FY12, and was a major driver of sales volume growth.
In the dishwashing category, Colgate saw increasing competition from a number of local and imported brands, however, the firm arranged a brand re-launch for the entire Lemon Max range. This make-over saw one of the pioneer dishwashing products on the market undergo an overhaul and acquiring a new look. Formulated with real lemon juice, the re-launched Lemon Max boasted greater grease cutting powers in heavily circulating adverts, which allowed increased brand equity and sales growth......
Here's a BR report on subsidized tractors in Punjab:
Tractor manufacturers have more than 10,000 tractors of various makes in their stocks for immediate delivery under the Punjab government's Green Tractor Scheme 2012-13 to the farmers before sowing of Rabi crops, a senior tractor industry executive told Business Recorder, here on Friday.
The Punjab government has completed the process of providing 10,000 tractors to farmers through transparent computerised balloting of 0.275 million applicants of 18 to 35 years age having land holding of 2 and a half acres to 25 acres irrigable and 50 acres arid land across the province. The Punjab government is providing subsidy of Rs 200,000 on each tractor. The provincial government has so far provided 30,000 tractors during the past four years under the Green Tractor scheme to the small farmers with a subsidy of Rs 6 billion to boost agriculture production in the province.
The executives said though the auto manufactures have increased prices of cars t recently yet the tractor industry is not only maintaining June 2012 prices but also giving one percent discount on the sale of tractors under the Green Tractors Scheme. They however suggested that the government should not delay payment of Rs 200,000 to the tractor manufacturers given as subsidy on the Green tractors. The prices of tractors manufactured in Pakistan are still the most competitive in the region despite severe electricity load-shedding and increased cost of production, they emphasised.
They said that small farmers suffered huge financial losses due to rain floods in Sindh and Balochistan in the out-going monsoon season this year, therefore the government should not increase the proposed rate of General Sales Tax from 5 percent to 10 percent in January next year as it would put an additional burden on the agriculture sector.
They said that the tractor industry sold 5,675 tractors in the first two months of the current financial year as against 2,000 of the previous year. President Farmers Associates of Pakistan (FAP) Dr Tariq Bucha has appreciated the Punjab government's Green Tractors Scheme and said the government should make immediate arrangements for delivery of the tractors to the lucky farmers so that they could be used them for preparing the fields before sowing of the Rabi crops seeds in time. Bucha demanded of the government to also provide subsidy and reduce the rate of GST on accessories such as trolleys, ploughs, etc.
Here's Pakistan Times on Benazir Tractor Scheme:
ISLAMABAD: All arrangements have been finalized to hold balloting of Benazir Tractors Scheme to provide subsidized tractors for growers.
The balloting for the scheme is expected to be held on September 6.This was stated by the Federal Minister for Food and Agriculture (MinFA), Nazar Muhammad Gondal responding to the live calls of the people after inaugurating the radio programme “Aaj Mandi key Bhao”, here on Monday.
The minister said that preparations had been finalized to provide 10,000 tractors to farmers under Benazir Tractor Scheme.
It may be recalled that about 355,000 printed application forms had been provided to farmers through the ZTBL branches in addition to those who applied on-line.
About 340,000 application were received, of which 277,106 were finalized for balloting of the scheme.
For Punjab province 5000 tractors, Sindh 2000, NWFP 1200 and for Balochistan 850 tractors would be allocated.
In AJK, FATA 350 tractors each while FANA 200 tractors and Federal Capital 50 tractors quota is fixed.
^^Riaz Haq Said: "Let's compare apples-to-apples. Total car sales volume in India in 2010 was 1.87 million units, according to the Wall Street Journal.....
This is not the best year for Pakistan auto sales. Pakistan car sales are recovering from a severe downturn in 2009.."
Why go all over the place? The data are here along with credible references:
It appears the number you are quoting from WSJ is for 2009-10 and the number your opponent is quoting is for 2010-11. Just a phase difference, methinks.
Also note that their production exceeds sales substantially, making India a major NET exporter.
OMG, the next table there shows that India is EXPORTING 3 TIMES as many cars as we produce in Pakistan. OMG, they are also exporting EXPORTING 3 TIMES as many buses & trucks as we produce in Pakistan.
We must be very, very careful before we open our markets to Indian companies or else they will just take over without even breaking a sweat.
Do you have similar data for Pakistan? Are we also NET exporters? Or are we still NET importers as we were in 1947? How many cars are imported, how many as assembled (CKD, SKD) and how many are locally manufactured? Does the GOP publish any data on this? Perhaps PAMA PAAPAM etc?
If you can get the data and some good references, perhaps you could update the wiki page for our country as well:
Here is a good research paper on the car industry in Pakistan:
It lists localization, players, deletion, simple parts v/s complex parts, successes & failures, opportunities & challenges and so on.
Please let us know what you think.
International frozen yogurt franchises Tutti Frutti and Fruz are coming to Pakistan, according to news reports:
Business Recorder on Tutti Frutti:
Tutti Frutti is a specialty brand available in various world markets, including the USA, Canada, Brazil, Malaysia, Thailand, Hong Kong, China, France, Pakistan and the United Kingdom. Work is in progress to open up outlets in countries like India, Bangladesh, Russia, Romania, Spain and various Middle Eastern countries.
17 outlets already opened in Pakistan. There are five outlets in Karachi, three each in Lahore and Islamabad, two in Rawalpindi, two at Bhera Motorway rest area and one each in Abbottabad and Faisalabad. Another 19 are under-construction in different cities. We are targeting about 100 branches by the end of the year 2013, reaching customers in nearly every city of Pakistan.
The Nation on Yogen Fruz:
LAHORE (PR) – Yogen Fruz, the world’s leading frozen yogurt chain opened its first outlet in DHA amidst much fanfare on Sunday. The master franchise of the Canadian desserts chain has been acquired by MFK Foods in Pakistan, and the local business group is already working on a plan to open outlets and franchises all across Pakistan.“When we received a query for bringing Yogen Fruz to Pakistan, we all were very excited. Pakistan is a huge consumer market and if the conditions are right, this country can attract a lot of foreign investments. We all flew in from Canada to be a part of this launch”, said Carlos Campo who is the Director Operations for Yogen Fruz worldwide, and is in Pakistan with his team to assist in the launch of this giant food and desserts chain.“Frozen yogurt is freshly prepared, is rich in probiotics, and is available in endless flavours,” added Basir Syed, CEO MFK Foods and master franchisor for Yogen Fruz Pakistan. “Yogen Fruz is here, and soon it will be available in all parts of Pakistan. We have an aggressive business development plan and we have received numerous franchise requests and sold many as well. We will also be opening outlets in other parts of Lahore as well.”
Here's some interesting tidbits from a Dutch website about Pak middle class:
Over 80% buy no more than a single pair of shoes a year
A survey conducted by Gallup Pakistan during May 2012 found that 62% of respondents purchased just one pair of shoes for personal use during the previous 12 months. An additional 21% did not purchase any shoes at all during this period. According to Euromonitor International estimates, unit sales of shoes in Pakistan rose by 75.4% between 2006 and 2011, with real value sales increasing by 27.1%, to US$805 million.
Just how big is the middle class?
Writing on Dawn.com, Saki Sherani argues that “two parallel universes existing side by side in Pakistan: an expanding middle class with a voracious appetite for consumption, and a [larger] swathe of population that is increasingly food-insecure.” The consensus estimate is that around 40 million people fall into the former category, but taking the black economy into account, he estimates that the true figure is actually 70 million. He adds that “In absolute terms, it is the fourth largest middle class cohort in Asia, behind China, India and Indonesia. Affluent, educated, urbanised, and increasingly 'globalised,' Pakistan's middle class is not only growing, but is already a voracious consumer.” He also cites an e-mail he received from a friend who recently visited the country: “This place is rocking. The pizza parlours, coffee houses, swank new malls are all packed, brimming with consumers. It took us nearly a month to get a reservation in Karachi's top restaurant!” According to Euromonitor International data, the proportion of Pakistanis with an annual disposable income of at least US$10,000 (at purchasing power parity) increased from 29.2% to 52.3% between 2006 and 2011.
M-commerce: huge potential but many obstacles remain
Speaking to The News Pakistan, against the backdrop of the 5th International Conference on Mobile Banking in Pakistan, which took place in Karachi during mid March, Lito Villanueva of Visa International said that there was huge potential for m-commerce in Pakistan because most people are still unbanked and the rate of mobile penetration is relatively high. However, Amer Pasha, country manager of Visa Pakistan cautioned that levels of financial literacy were still low, even among literate people. He added that most shopkeepers and traders “prefer cash so that they can remain in the undocumented economy.”
Skin creams popular during winter
A survey conducted by Gallup Pakistan during January 2012 has found that 91% of Pakistanis use some method to protect their skin during the dry winter months. 57% said they used cream or lotion to protect their skin, while 24% claimed to use oil, and 8% soap or facewash, while 2% utilised homemade remedies. According to Euromonitor International data, value sales of skin care products in Pakistan were worth US$92.9 million during 2010....
Ashmit (India) said...
"Moreover, auto analysts such as Furqan Punjani have termed this spike in sales as an aberration and that the sales chart is expected to palateau out and register a a very humble growth rate of 5-10% for FY12"
Riaz Haq said...
"Before the July jump, Economic Survey of Pakistan reported that from July 2010 to March 2011, sales of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively, much higher than the pessimistic forecast from Punjani that you quote"
Ashmit (India) said...
The data that you quote is irrelavent. It represents sales in 3 quarters of the previous fiscal. Punjani is estimating the growth in FY12
@Ashmit - Why do you call yourself Ashmit(India)?
Are you afraid that we might confuse you with some other Ashmit? Do you think there is an Ashmit(Pakistan) who comments on this blog?
In any case, returning to this year-old debate between you and Riaz, it looks like Riaz was RIGHT and that Punjani fellow was WRONG.
2011-12(FY12)Car Sales Growth: 23%
Here's a Forbes piece on Millat tractors in Pakistan:
Almost a year after floods devastated Pakistan, swamping 5.8 million acres of farmland and displacing millions of people, Ashaq Malik, who grows cotton, sugarcane and wheat on 865 acres in Punjab province, has reason to feel optimistic. After nearly a third of his land was inundated, today he is seeing a strong harvest. "As soon as the water level fell down, we started reconstructing the houses and working on the fields," says Malik. "Today there is no problem with the crops."
Companies that service the agriculture sector are also thriving in the rebound, none more than Millat Tractors of Lahore, which also manufactures other farm gear. Last year Millat earned 2.3 billion rupees ($29 million) on sales of $263 million, a 40% increase from the previous year. In the first quarter of 2011 profits grew 52% from the same period a year earlier..
To buy his 150,000 shares, Ansari--then a 39-year-old general manager--sold a plot of land, liquidated his retirement funds and borrowed money from his father. "It was a lot of money to me back then," he says. "Today it's like a lottery coming your way. The value has increased many, many fold since then."
Today the public, including Millat's 1,600 employees, owns 42% of the company; management and kin 28%; and banks and other institutions the rest. Employees are prosperous because of stock dividends and their salaries. Most of Millat's employees pay income tax--a sign of affluence in Pakistan--and have their own cars.
Here's a News story on rising obesity in Pakistan:
KARACHI: The obesity is an emerging challenge to human well-being like other parts of the world, it was also on the increase in Pakistan.
The overweight and obesity are the fifth leading risk for global deaths.
The World Health Organization (WHO) estimates suggest that 26 percent of women and 19 percent of men in Pakistan are obese. Women are 2-3 times more likely to be obese.Childhood obesity is increasing with an estimated value of 10 percent.
This was stated by Prof Dr Muhammad Iqbal Choudhary, Director International Center for Chemical and Biological Sciences (ICCBS), Karachi University.
He was delivering a lecture on Wednesday at the 4th International Symposium-Cum-Training Course on Molecular Medicine and Drug Research being held at the International Center for Chemical and Biological Sciences (ICCBS).
Over 350 scientists, including 35 scientists from 24 countries, are attending the international event, organised by Dr Panjwani Center for Molecular Medicine and Drug Research (PCMD), University of Karachi.
Dr. Iqbal said that obesity had become a serious health problem worldwide, which is a result of an imbalance between energy intake and expenditure; the molecular cascade involves in obesity and associated disorders are not fully understood.
Proliferation of adipocytes plays an important role in the onset and progression of obesity, he added.
`Obesity has been linked to several serious health ailments like heart disease and stroke, high blood pressure, diabetes, cancer.
Overweight and obesity are major risk factors for a number of chronic diseases, including diabetes, cardiovascular diseases and cancer; once considered a problem only in high income countries, overweight and obesity are now on the rise in low and middle-income countries.
Overweight and obesity are largely preventable; the intake of healthier foods, and regular physical activity are easiest ways to prevent obesity, he said.
There is an urgent need to have R&D programme in the field of anti-obesity drug discovery and development, he urged, saying that the fundamental causes of obesity are an increased intake of energy-dense foods that are high in fat, salt and sugars but low in vitamins, minerals and other micronutrients; and a decrease in physical activity due to the increasingly sedentary nature of many forms of work, changing modes of transportation and increasing urbanization.
Talking about the multi-drug-resistant pathogens, he said that a rapid decline in research and development on new antibiotics coincides with increasing frequency of infections caused by multi-drug-resistant pathogens.
The key reason of bacterial resistance is the indiscriminate of suboptimal use of antibiotics. During the last three days of the symposium, various lectures of the national and international scientists were held on different scientific issues.
Here's ET on cost difference in Indian and Pakistani cars:
In support of his claim, he said average cost of a Pakistani car (excluding taxes) is Rs750,000. An average Pakistani car uses 60% of local components and the value of such components is around Rs450,000. This is the amount that the parts makers lost on each imported car, he said.
Most people believe that locally assembled cars are much more expensive than vehicles manufactured in other countries, but this is a wrong perception, the industry representatives said while giving a comparison between prices of Pakistani cars and those manufactured in regional countries.
Pakistani cars are cheaper than most cars manufactured in India, Allawala claimed, adding 1,800cc Toyota Corolla is being sold in India for $16,334 (retail price excluding taxes) while the price of the same car in Pakistan is $13,253, lower by $3,081.
Including taxes, the retail price of Toyota Corolla in India is $26,744 while in Pakistan it is $19,781, a difference of $6,963.
Similarly, the retail price of 1,800cc Honda Civic in India he said was $19,216 (excluding all taxes) while the same car is being sold for $15,214 in Pakistan, a difference of $4,002, he said.
After including all taxes, the difference in prices of Honda Civic in Pakistan and India is $7,403. In India, Civic is being sold for $30,455 while it is available at $23,052 in Pakistan.
The automakers and vendors have underlined the need for revision in the import duty slabs, saying the old duty structures are favouring car importers.
In response to a question, PAMA Director General Abdul Waheed cautioned the consumers, who are opting for imported used cars, saying they were making a wrong decision.
“The buyers of used cars may spend less initially, but eventually they pay much more in terms of expensive maintenance and low resale value compared to a new car,” he said.
Here's an ET story on Samsung's marketing push in Pakistan:
Samsung, a global leader in consumer electronics, is aiming to secure a larger share of the Pakistani market by the end of this year. Its action plan includes advertising heavily on all platforms available, with a special focus on brand shops, providing brand awareness, and introducing a range of products under one roof.
“In the televisions market, Samsung in Pakistan currently enjoys a 38% share, which we are aiming to increase up to 50% by the end of 2013,” Amir Shahzad, Samsung Pakistan’s Retail and Channel Management head (Consumer Electronics) recently told The Express Tribune.
Though Samsung offers a wide range of products, including smartphones, personal computers, printers, cameras, home appliances, medical devices, semiconductors and LED solutions, the company’s Pakistani management is focusing specifically on the television segment by introducing the latest plasma TVs, LED TVs, home theatres and other home appliances.
The management says the company is benefitting from the rise of the Pakistani middle class. The global economic downturn – which forced many other electronic brands like Sony, Sharp and JVC to minimise operations in Pakistan – is another factor that has provided Samsung the opportunity to step in and capture the large domestic market.
Samsung operates through 550 dealerships in Pakistan, spread over the length and breadth of the country, through which a complete range of products is available to consumers. More recently, the rising trend of multinational retail outlets in large cities has forced the management to introduce brand shops in the country which showcase the latest Samsung products. The 30 “strategically-located” brand shops offer genuine Samsung warranties for 3D Smart TVs, LED and LCD TVs, monitors, plasma display panels, IT products, cameras and home appliances.
“Our latest appliances are relatively higher-end, but we are also targeting the rising middle class. These retail outlets are providing us a wonderful platform to promote our brand,” Shahzad said.
The staff in each shop guides consumers in buying the right products according to their demands and budgets, Shahzad explained. “Such shops also provide technical assistance and after-sales guarantee and maintenance facilities to the customer,” he added.
“The Samsung Brand Shop is a revolutionary business model for the Samsung retail brand, from where all retailers can learn and emulate building a consistent branding approach,” Shahzad claimed.
However, like other multinationals, Samsung is reluctant to invest directly in Pakistan. At this stage, it is not even considering starting a proper assembling or manufacturing plant for its products in the country. It does assemble a handful of its products in country, but that is a tiny operation compared to its global operations, and Shahzad says the sole purpose of this business is to circumvent import duties and enable Samsung to compete in the local market at better rates.
That leaves Samsung’s sole focus on heavy advertisement in order to register itself in the minds of the masses. “We want every Pakistani to use Samsung products, for which we are using every possible advertising channel, whether electronic and print media, road shows, brand shops, social media, promotion schemes, online advertisements,” Shahzad said.
“We believe that advertising heavily is a strategy which will help us achieve our targets and make Samsung the country leader in all the different products offered by the company,” he added.
Here's an ET report on global consumer products' giant P&G's expansion plans in Pakistan:
KARACHI: Procter and Gamble (P&G) has identified Pakistan as one of its top 10 emerging markets – that include emerging economies like Brazil and India – and the country will be the focus of it attention for further investments, P&G Pakistan Communications Manager Omeir Dawoodji told a group of journalists during a visit to the company’s state-of-the-art manufacturing facility at Port Qasim on Thursday.
Dawoodji was tight-lipped regarding the amount P&G plans to invest. He, however, confirmed that the Cincinnati, Ohio-based consumer goods giant wants to expand its manufacturing footprint in the country.
Dawoodji did not disclose the cost of setting up the Port Qasim plant, currently manufacturing the Ariel brand, but emphasised that P&G intends to make it a mega-manufacturing facility and utilise it for manufacturing other brands as well. The company markets over 300 brands globally, but its Pakistani subsidiary only deals in eight brands.
P&G Pakistan had acquired a huge piece of land for the manufacturing facility, which was inaugurated in 2010, but it utilised about 20% of the acquired land only, leaving enough space for further expansion.
It has been 185 years of growth for the now $85-billion company and further growth has to come through emerging markets, Dawoodji said, explaining why Pakistan is important for the company’s global parent.
The manufacturer of some of the leading brands like Pampers, Always and Safeguard has had tremendous growth during the past three years. P&G’s revenue for the year ended June 2012 was Rs22 billion, about 50% increase over the previous year.
The fiscal year 2012-13, too, will be a high growth year for P&G Pakistan, the company’s country head Faisal Sabzwari told The Express Tribune in a recent interview.
In a sign of its long-term commitment to the country, the Pakistani arm of the consumer goods giant has replicated its global strategy of incorporating the use of renewable energy sources for energy conservation, reducing water consumption and recycling the waste as demonstrated during the plant’s tour.
The facility at Port Qasim has been designed to use skylight during the day with a lot of windows built both in the office and the factory areas. They have been able to reduce their energy consumption by 12% during the last two years, the officials at the site told the media.
The reduction in water usage was about 46% as they have planted palm trees and used gravel instead of grass for the landscape to conserve water. “We put less than 2% of our waste to landfill,” an official said. About 97% of the waste generated is put to beneficial reuse, he said.
“The Port Qasim plant is our pride among the 75-plus plants P&G operates all over the world,” Dawoodji said while highlighting state-of-the-art features of the plant. “Goods manufactured at this facility can be exported to countries with rigorous quality standards.”
Here's an ET story on middle class powering FMCG growth in Pakistan:
Procter & Gamble (P&G), one of the world’s largest consumer goods company, has recognised Pakistan as one of the top 10 emerging markets to focus investment in. This sounds like good news for our cash-strapped economy, and it is equally good news for those who have invested in P&G.
It makes sense for any fast moving consumer goods (FMCG) to invest in a country where the world’s biggest consumer goods names – Unilever, P&G, Nestle and Mondel-z (formerly Kraft Foods) – are not only operating, but also growing significantly.
According to the State Bank of Pakistan, the net profits of FMCG companies listed on the Karachi Stock Exchange grew in excess of 20% in fiscal year (FY) 2011-12. P&G, which is not listed on the KSE, has witnessed tremendous growth in revenues during the past three years – including 50% revenue growth in FY2012. Besides the consumer goods sector, its supporting industries like packaging and distribution companies have also seen their toplines grow significantly.
So what are the factors contributing to this growth?
If the fact that these companies are selling essential food items and consumer goods in the world’s sixth-largest market by consumer size is not satisfying enough for you, here’s a more detailed and nuanced explanation.
“Economics and demographics are together at play in Pakistan,” P&G Pakistan Country Manager Faisal Sabzwari told this correspondent in a recent interview. The boom in the rural economy has also been a major contributor to their growth – thanks to a series of bumper crops of agricultural produce and wheat support prices, which were raised by the government in recent years.
Besides this, according to Sabzwari, Pakistan is one of the top countries adding 20-somethings to its workforce; these are the people establishing families, getting new jobs and helping market sizes grow.
“We have millions of consumers entering independent disposable income space in their lives every year,” Sabzwari said, while referring to the growing middle class.
The market size in Pakistan has also grown in terms of volumes, without taking pricing into account. “Increasing urbanisation and the growing middle class are key drivers of the FMCG business,” Sabzwari said.
Pakistan’s is urbanising faster than other developing countries, according to Sabzwari. “The country’s population is growing at under 3%, while the rate of migration to urban centres is even higher,” according to Muzammil Aslam, managing director at Emerging Markets Rsearch.
“A population base of 180 million talented and hard-working people hungry for prosperity ensures that nothing can hold this country back from growing,” P&G Pakistan’s chief said. While looking at the growing middle class, he said, it is important to look at their consumption habits. “We are exposing more consumers to value brands like Pampers and Always,” he explained.
It may be added here that consumer spending in Pakistan has increased by an average of 26% in three years, according to a Bloomberg report published on November 21, 2012 – a strong sign that people are consuming more goods than ever before.
This rise in consumer demand has spurred the growth of supermarkets across major urban centres, which include, but are no longer limited to Karachi, Hyderabad, Multan, Lahore, Faisalabad and Islamabad.
Such superstores are getting larger and asking manufacturers for broader brand portfolios in order to serve their customers better. They have larger shelves, enabling them to have more sophisticated and developed categories in which they can stock more products than ever before....
KARACHI: Auto sales outlook remains bright as import of completely knocked down (CKD) kits of locally-produced heavy vehicles, cars and bikes rose by 37, 51 and 23 per cent, respectively, in the first seven months of this fiscal year from the same period last year.
According to the figures of Pakistan Bureau of Statistics (PBS), import of CKD kits for buses, trucks and heavy vehicles increased to $91.4 million in July-Jan 2014-15 from $66.5m in the same period last year.
Import of CKDs of locally-produced cars and bikes swelled to $280m and $51.5m from $185m and $42m, respectively.
However, higher imports of used cars seemed to have not caused any serious blow to the locally-produced cars whose sales went up to 74,497 units in July-Jan 2014-15 as compared to 64,835 units in corresponding period of last year.
Total import of cars, in which the share of used cars is over 90pc, rose by 32.5pc to $148.5m in the period under review compared to $112m in the same period last year.
Declining trend in imports of completely built up (CBU) buses, trucks and other heavy vehicles in the recent months has been giving much support to the sales of locally produced vehicles.
The import of buses, trucks and other heavy vehicles fell by 43pc to $59m in July-Jan period of 2014-15 as compared to $103m in the same period last year.
Sales of locally-produced trucks and bus jumped to 2,027 and 2,326 units from 1,249 and 1,579 units, showed Pakistan Automotive Manufacturers Association (Pama) data.
The rising trend of purchasing costlier heavy bikes (new and used ones) has now slowed down which is evident from 52pc fall in CBU imports of bikes to $987,000 from $2m.
Sales of locally-produced Honda and Suzuki bikes plunged to 355,174 and 12,647 units in July-Jan 2014-15 as compared to 376,003 and 13,852 units in same period last year.
Around 3,563 units of DYL Motorcycles were sold in the first seven months of this fiscal year as compared to 9,592 units in the corresponding period last year. Hero bike sales fell to 6,937 units from 8,823 units.
Published in Dawn February 26th , 2015
KARACHI: Car sales are expected to reach their highest level in three years by the end of June 2015, analysts have predicted, stressing that the growth is depended on the sustained success of new models.
With a 24% improvement during the first nine months (Jul-Mar) of fiscal year 2015 (FY15), sales of new and used vehicles picked up in March and are now expected to reach their highest in three years by the end of the current fiscal year.
“Auto sales are expected to grow in double-digits but they are highly dependent on automaker’s new models,” Global Research analyst Asad Raza Nayani told The Express Tribune.
“The sales depend on the new make of Toyota Corolla and Punjab government’s Apna Rozgar Scheme,” Nayani added.
The growth of automobiles in FY15 is expected to touch 165,000 units, 23% compared to last year, he said. But, that will still be low compared to 175,000 units sold in FY12.
Looking at March 2015 sales alone, one can be a little more bullish in the remaining three months (April-June) of FY15.
According to latest figures posted by the Pakistan Automotive Manufacturers Association, local auto sales, including light commercial vehicles, shot up by an impressive 72% to 21,147 units compared to 12,269 units during the same month last year.
According to Sherman Securities, car sales in March are possibly the highest-ever sales posted by the Pakistan auto industry in a single month.
If monthly car sales grow at the same rate as they did in March 2015, which it possibly can, cumulative car sales may touch a six-year high.
However, analysts are not yet entirely optimistic as the auto industry is still facing considerable challenges despite many positives including growing margins of auto companies, declining interest rates and double-digit growth in sales.
“The interests rates have come down considerably in the last four months, but banks are still cautious when it comes to auto financing which is not helping car sales considering its potential,” Nayani added.
Industry officials and analysts estimate that car financing still stands at a mere 30-35% of the total car sales in the country, which is considerably low, compared to other countries.
Banks are reluctant when it comes to car financing due to its bad experiences during the last few years when Non-Performing Loans (NPL) ballooned and considerably hurt the financial health of banks.
The cumulative sales during the first nine months (Jul-Mar) of FY15 stood at 124,000 units, up 24% compared to 100,000 units in the same period of previous year. However, sales growth drops to 19% if car sales under the Punjab taxi scheme that was launched in February 2015 is excluded.
Car manufacturers had a blissful 2014-15 as they saw sales jump to 151,134 units from 118,102 in the preceding fiscal year, media reports said on Saturday.
The launch of new Toyota Corolla brought a big relief to its assembler, pushing up the company’s sales to 51,398 units from 29,087 and also making a positive impact in overall sales figures, Pakistan Automotive Manufacturers Association (PAMA) said on Friday.
Another uplift in overall sales came from Punjab government’s taxi scheme that helped sales of Suzuki Bolan rise to 23,582 units from 14,088, and that of Suzuki Ravi to 22,815 from 12,419.
Even increase in car prices by the manufacturers did not dampen buyers’ enthusiasm. Moreover, a decline in interest rates to seven per cent from 10pc by the State Bank of Pakistan (SBP) in the last one year also pushed up sales by at least 10pc on cars being sold under bank financing.
Launched in March 2014, Suzuki Wagon R compensated the 32pc sales loss in Swift. Wagon R’s sales more than tripled to 5,246 units in FY15 from 1,621 a year ago, while Swift sales dropped to 3,490 from 5,128.
Facing stiff competition with thriving used-car imports of small engine power, Suzuki Mehran sales slightly inched up to 29,886 from 29,509 units, while Cultus sales fell to 13,837 from 14,682.
The just-ended fiscal year proved a bit difficult for Honda Civic in the wake of Toyota Corolla’s launch, as its sales dropped to 7,806 units from 9,933 in FY14.
Pak Suzuki Motor Company Limited (PSMCL) did not officially announce halt in Liana production despite the fact that no car was rolled out during FY15. However, sales from old stocks stood at 23 units in 2014-15 compared to 161 a year earlier. Only 72 Lianas were produced each in October and December 2013.
Hyundai Santro also faced the same fate as only 82 and 128 units were produced in January and February 2014, respectively, while no car was assembled in the 2014-15. Its sales from some old stocks were 50 units in FY15 compared to 152 in FY14.
Muhammad Tahir Saeed of Topline Securities told Dawn that local car assemblers registered “an excellent” year-on-year growth of 31pc during FY15 versus just 1pc growth in FY14 and a compound annual growth rate (CAGR) of 5.3pc during the last five years (FY11-15).
#Pakistan's monthly auto sales up 129pc to 15,909 in units in July 2015 https://shar.es/1tTkru via @sharethis
Pakistan local car assemblers have started the new fiscal year with a positive growth of around 129 percent year on year (YoY), according to the data released by Pakistan Automotive Manufacturers Association (PAMA).
During July 2015, the local vehicle sales including LCVs, Vans and Jeeps stood at 15,909 units. It is important to note that in July 2014, sales dropped abnormally due to increase in advance motor vehicle tax and imposition of advance income tax on transfer of motor vehicles in Federal Budget FY15, said Muhammad Tahir Saeed, an analyst at Topline Research.
“Furthermore, anticipated new ‘Corolla’ model and less working hours due to Ramadan were other factors contributing to the historical low sales in last July,” he added.
Overall healthy growth in auto sector is indicative of increase in per capita income, improved farmer economics and overall recovery of the economy. Car financing is also picking up gradually, currently estimated at 30 percent versus 5.0 percent few years ago. To recall, car sales in Pakistan grew at a 5-year (FY11-15) CAGR of 5.3 percent to 179,953 units while volumes surged by 31 percent in FY15 on the back of a new model of Toyota Corolla, Taxi Scheme of Punjab government and an increase in car financing due to 42-year low interest rates in the country.
“We forecast car sales to grow at 13 percent in FY16 to reach at 203,653 units,” the analyst added.
Among individual companies, Pak Suzuki Motors (PSMC) sales increased by 119 percent YoY to 9,464 units in Jul 2015 primarily due to Punjab government’s Taxi Scheme. Volumes declined by three percent on Month-on-Month (MoM) basis due to extended Eid holidays.
Indus Motors Company (IMC) sold around 4,259 units in Jul 2015 compared to 1,106 units in the same month last year. It is pertinent to note that customers were waiting for the new model of Toyota Corolla in the same month last year which was the main reason for such an abnormally low base. On MoM basis, INDU sales decreased by 22 percent from 5,458 units it sold in Jun 2015.
Saeed attributed this decline to less working hours during Ramadan and extended Eid holidays. Just to highlight, Toyota’s new Corolla model is sold out for next 3-4 months, according to the sources in the industry.
HCAR sold 2,181 units in Jul 2015 compared to 1,505 units in the same month last year. On MoM basis, HCAR sales decreased by 12 percent in Jul 2015 from 2,488 units in Jun 2015.
It is important to note that HCAR is consistently posting sales growth despite the new model of Toyota Corolla launched by its competitor Indus Motors. This indicates that overall market size of Pakistan automobile sector is growing.
Millat Tractors (MTL) and Al Ghazi (AGTL) sales have been affected due to the floods.
MTL sold 743 units in July 2015 compared to 1,703 units in the same month last year. On Month-on-Month basis, MTL sales decreased by 71 percent in July 2015 from 2,556 units in June 2015.
AGTL sold 820 units in Jul 2015 compared to 1,056 units in the same month last year. On Month-on-Month basis, AGTL sales decreased by 40 percent in Jul 2015 from 1,375 units in Jun 2015.
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