Think Tank Analyst
- Aug 26, 2020
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Paradigm shift in Pakistan’s auto industryDecline in import of luxury cars providing level playing field for SUV makers
Consumers must have wondered why new entrants in the auto sector of Pakistan are introducing more sport utility vehicles (SUVs) instead of low-end cars, which were expected to be rolled out when the new auto policy was unveiled.
“Pakistan’s auto market is growing and a switch from sedan to SUVs or crossover is taking place,” said AHL Research auto analyst Arsalan Hanif. “With advanced technology and better safety features in the SUV segment, its acceptability ratio has increased,” he added.
Companies have pinned high hopes on this category, which is reflected in the recent testing of an autonomous SUV, UNI-T, by the joint venture of Master Motors and Changan.
With a 10-20% price difference between sedan and SUVs, the consumers had started giving preference to SUVs because of better features and a more luxurious feel, Hanif said.
Read: Pakistan’s auto sector: growth comes at a high cost
On the other hand, a decline in imports of luxury or high-end cars is also providing a level playing field for SUV manufacturers.
Likewise, on the global front, SUVs are attracting more attention as their market share is increasing. For instance, in India, the SUV market share has increased from 10% to 36% in the last eight years.
However, contrary to Hanif’s views, Regal Automobile Pakistan Managing Director Muhammad Adeel Usman said that mostly the cars introduced recently were not SUVs, they were called crossover utility vehicles (CUVs) and their estimated sales were 5,000 units per month for all companies.
“As far as sales performance of SUVs is concerned, KIA has managed to sell around 25,000 Sportage since its operations commenced,” said Hanif.
Hyundai Nishat sold 2,759 units of Tucson in the first nine months of current fiscal year 2020-21. As per market grapevine, MG, an unlisted player, also sold more than 2,000 units.
A majority of new players (BAIC, Hawal, Peugeot, Changan and Cherry) are also planning to launch SUVs in Pakistan because low-end cars face more price competition and have low margins.
Read more: Auto parts body demands release of tax refunds
The new entrants are introducing CUVs following the trend in the international market where sales of CUVs have increased rapidly, according to Usman.
Pakistanis have been deprived of durable and affordable vehicles for a long time, but with added advantage of a healthy economy, automobile players are now enjoying an amazing year.
Banks have given a further boost to demand, by providing the highest number of auto loans this year, he added.
Although the new entrants have started launching “budget sedans”, CUVs are an easier market to tap at the moment.
The buying power of consumers also provides a level playing field as lower interest rate, improvement in macros, higher foreign remittances and revival of economic activity have improved the purchasing power of consumers, highlighted Hanif.
Published in The Express Tribune, May 16th, 2021.