Cars Sales: Booked vs Delivered

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For the first time ever, sales of passenger cars assembled locally witnessed an unexpected surge in the month of December 2021, opposed to usually when sales normally take a hit towards the end of the year as buyers generally prefer New Year purchasing over the last month of an outgoing year.

The data released by PAMA (Pakistan Automobile Manufacturers Association) show us some mind boggling figures. For example, 9,195 units of 660cc Alto were sold, the highest individual number ever for any locally assembled model. Surprisingly, this is three times more than the average monthly sales of Suzuki Mehran during its tenure. This helped Pak Suzuki sell the highest number of cars ever in a month since its inception with 15,503 units sold in December 2021. Honda Atlas also sold 4,708 units of Civic & City combined claiming to have sold more than 3,000 units of 6th gen City in a month.

Related: Key Takes from Soaring Car Sales in December 2021

The significant thing to note however, is that the sales numbers in PAMA data are actually ‘bookings’, when an automaker receives payment of a car, its considered as sold. Contrary to other markets where deliveries are actually counted as sales. This simply means that more than 9,000 units of Alto were booked, more than combined 4,000 units of Civic & City were booked and so on…

This happened because a large number of cars were booked in anticipation of another hike in prices following the approval of mini-budget, which see added duties & taxes imposed on vehicles. Bear in mind car prices were already substantially increased in two steps, first was implemented in November/ December 2021 and the other in January 2022. 

Related: Soaring Car Sales- Real Buyers or Investors?

So how come all of a sudden despite alarming price increase & recent restrictions on car financing, car sales are soaring so high. This is most likely due to the presence of huge number of investors in the market compared to genuine buyers. As according to a recent research by Pakistan Institute of Development Economics (PIDE), it has been revealed that up to 90% passenger vehicles in Pakistan are sold against premium/ on money. The research also disclosed that automobile sector has made undocumented transactions worth up to Rs 170 billion during last 5 years under the head of additional charges, better known as own/ premium, paid to the dealerships to get an immediate delivery of a vehicle.

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Today the automakers are happy since the units are getting sold in record numbers, the investors are happy since they are getting healthy profits without doing much, however the number of new car registrations will show us a clear picture whether these cars are getting into the hands of genuine customers or not. The market condition shows that the genuine still has to wait for several months to get the delivery of a new vehicle. The current soaring sales trend despite massive increase in prices might be nothing more than a bubble, which will eventually burst sooner or later.

Related: A Market Where Cars Are Expensive Than Residential Property

The true picture will emerge when PAMA decides to disclose figures only when the units are delivered to the customers, and not just the number of bookings counted as sales.

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