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Pakistan Automobiles: Mar 2018 Auto Sales +9% YoY (-1% MoM) - In-line with expectation

• According to the latest PAMA data, Pakistan local car assemblers (including LCVs, Vans and Jeeps) managed to sell 22,380 units in Mar 2018, up 9% YoY. A nominal decline of 1% was seen in Mar 2018 on sequential basis despite normal working days in the month indicating slow down in demand growth as 1Q of calendar year is generally a robust period for auto sales. These numbers are in line with our estimates. The change in import procedure, availability of auto finance at lower rates and demand from online ride hailing services have contributed to demand in outgoing month. Cumulatively, industry sales during 9MFY18 exhibited 22% YoY growth to 192,734 units.
• Sales of Honda (HCAR) have outperformed peers, posting 41%/19% YoY/MoM growth. These are the highest monthly sales in history of the company at 5,344 units due to success of recently revamped City, strong demand for Civic and rebound in sales of SUV variant BRV. 9MFY18 sales were up 39% YoY for HCAR to 39,013 units.
• PSMC sales witnessed slow down after 8  months of double digit growth. Sales only grew by 4% YoY in Mar 2018 as price conscious models exhibited flat sales growth, however demand picked up for higher price variants Cultus up 14% and Swift up 13% YoY.  9MFY18 sales were up 27% YoY for PSMC to 107,294 units.
• Toyota’s Indus Motors (INDU) lagged behind peers with decrease of -2%/14% YoY/MoM as it continues to face capacity constraints, though 9MFY18 units sales are up 1% YoY.
• Tractor sales continue to exhibit upward trajectory with sales growing by 15% YoY in Mar 2018. Al-Ghazi Tractors (AGTL) outperformed exhibiting 23% YoY growth. During 9MFY18 tractor sales reached 49,034 units up 27% YoY. Going forward, we expect lower GST on tractor purchase, fertilizer cash subsidy, along with Rs2bn subsidy for farmers on tractor purchase recently announced in FY18 Sindh provincial budget, which will improve farmers purchasing power & thus support overall tractor sales going forward.
• Truck & Bus sales of PAMA member companies in Mar 2018 remained robust growing by 40% YoY, while during 9MFY18 sales rose 18% YoY. We foresee this trend to continue fueled by CPEC, higher road connectivity, low financing rate, robust growth in LSM sector and  change in enforcement of axle load limit per truck on highways.
• Motorcycle/3-wheeler sales Mar 2018 have increased by 27% YoY. ALTH have outperformed peers, posting 27%/28% YoY/MoM. These are the highest monthly sales in history of the company at 108,736 units. 9MFY18 sales are up 19% YoY due to rising disposable income of lower middle class.