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Pakistan͛s automotive industry is continuing in a slump which began in the previous financial year
andaccording to BMI͛s recently published Pakistan Automotives Report, the industry͛s performance this
yearwill be even worse. In FY08, which ended in June 2008, total vehicle sales fell by 6.2%. The
downturncarried over into FY09, with sales for the first half of the year (July to December 2008) down
by 48%year-on-year (y-o-y) to 52,927 units for cars and light commercial vehicles (LCVs), while
compared withNovember, sales for December were down 55%. These results concur with BMI͛s forecast
for a drop insales of cars and LCVs to around 112,000 units in FY09. We expect the total market to
contract by over32%, with the worst damage done in the car and bus segments, which we forecast to
fall by 45% each.Measures are being considered to arrest the industry͛s decline. Pakistan͛s Economic Co-
ordinationCommittee (ECC) is to consider a tax cut of 10% for domestic carmakers, which has been
suggested bythe Ministry of Industries and Production. However, the plan is not without its opposition,
as the FederalBoard of Revenue is reportedly against supporting individual sectors as this would prompt
otherindustries to seek help. Moreover, with just five carmakers producing locally, the automotive
industry isrelatively small. On the other hand, the industry is also largely self-sufficient as the majority of
its outputis sold within Pakistan; this reduces the country͛s reliance on imports and raises issues such as
theprotection of local jobs and the industry͛s contribution to the overall economy.

The poor state of the industry is reflected in BMI͛s Business Environment Rating for the
automotiveindustry in Asia Pacific, where Pakistan is in last place on a score of 42.4 out of a possible
100. Themarket is held back by low production growth potential and an average rating for sales growth.
However,as a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS) under the
auspices ofthe World Trade Organisation, the country͛s regulatory environment scores well. A number
of free tradeagreements also contribute to this criterion, although forming FTAs with non-Asian
countries wouldimprove this rating further. Despite low marks for bureaucracy and corruption, the
market does score wellfor its long-term economic risk and policy continuity.

With just a handful of manufacturers, Pakistan͛s competitive landscape remains narrow. Japanese
carmanufacturers control most of the country͛s passenger car production and sales. Figures for FY08
showthat Suzuki-brand models represented 62% of total Pakistani passenger car production and 51.7%
ofsales. Toyota is gaining, however, as its Corolla became the country͛s best-selling model in the first
halfof FY09.
http://download-reports.blogspot.com/2009/10/indus-motor-company-financial-analysis.html