Pakistani motorcycles market was up 7,6% in June, although the previous gloomy months. The government decision of avoiding a complete lockdown seems to pay off. However, the trade off entails an even faster spread of the virus.
2020 Motorcycles Market trend & outlook
Despite the high expectations of a recovery, following the double-digit lost reported the previous year, the beginning of 2020 has not been positive in Pakistan with Year to Date February sales at 281.542, down 2.9% .
The Covid19 emergency has been the “perfect storm” on the market, pushing March sales down 27.9%. The subsequent lockdown of major economic activities drove April sales down 97%, with Honda delivering 2k unit. Year to date April sales have been 383.995, down 33.9%.
During May and June economic activities have been gradually reopened. However, as Covid19 spread seems far from slowing down, businesses are still in great difficulty.
The motorcycles industry, which is the main mobility sector in the country, perfectly mirrors the trend, with May sales at 39.167 (-75.3%)
The outlook is definite negative as Pakistan is still dealing with containment measures against the spread of Covid19. The lack of adequate measures is extending activities’ shutdown period that will eventually deteriorate customers’ purchasing power even in the post-covid19 era.
June seems to be a turning point in the market as the month closed at +7,6%. Indeed, despite Virus cases soar, Pakistan government is refusing to impose a complete lockdown, shielding the country from an economic collapse.
At the moment our view for the full year 2020 is for 1.41 million sales, down near 15% from the previous year.
Following years of records, in 2019 market down 12%
According to data released by the Pakistan Association of Automotive Manufacturers, in 2019 the new two/three-wheeler sales have been 1.67 million, down 12.0%. Following years of rapid development, in 2019 the market has been hit by the imposition of various new taxes and duties – such as the the Federal Excise Duty (FED) – by the government. With a sharp depreciation of Pakistani Rupee against US dollar, vehicles’ price went up massively, reducing customers’ demand.
For what concern the competitive landscape, all competitors are producing locally with only a reduced number of manufacturers who are fighting in the market against local brands (DYL, Sohab, United Auto, Sazgar, Road Prince, Hero Motor (a Pakistan company) Ravi) Japanese (Honda, Suzuki and Yamaha) and Chinese (Qingqi).
Pakistani Market Heritage
Before 2004, nobody could have ever thought that Pakistan motorcycle industry would flourish at such an exorbitant scale. In those years the market volume was below 0.1 million annual units and two companies only (Atlas Honda and Dawood Yamaha) were operating in the market. Suzuki and Qingqi held minor shares.
Thanks to government open policy, new manufacturers entered the market backed by Chinese technology and the sector become crucial in sustaining Pakistan economic development. In the last 15 years, it has become the preferred solution for individual mobility.
The following factors played a vital role in this development:
- Cheap but reliable technology from China.
- Independent sourcing of technology i.e Engines from China and Body parts from local vendors.
- Assemblers of Japanese brands had to pay a big amount as royalty to their principals, while new assemblers are sourcing everything independently. It has reduced bike cost.
- Overhead expenses are small as most of the companies operate in limited areas.
- Financing/leasing facility is available at local level. This facilitated lower-income people to buy a bike despite limited resources.
In recent years, Pakistani motorcycles industry has been among the fastest in the World. Indeed, the milestone of 1 million units has been hit for the first time only in 2015 and now the market is already running towards the 2 million annual sales. Following the over 1.4 million sales achieved in 2017, the market further boomed in 2018, with a record of 1.9 million sales. up 6.6%, and scoring the All Time Record.
However, rupee depreciation together with tax increase and less cash available for credit, penalised the market since the end of 2018. Motorcycles’ price further increase, discouraging the demand and the market has taken a negative path.
This article was written with the contribution of Mr. Imtiaz Ahmad, a Motorcycles professional living in Pakistan.