Pakistan Automobiles: FY16 kicked off on a strong note for local automobiles as the industry grew by 80% (17.8k) YoY in Jul’15. Strong acceptance of 2014 Corolla model and Rozgar schemes provided the much-needed impetus to growth in the auto sector. The usual contributors, passenger cars & LCV segment, went up by 105% and 193% YoY respectively. The other sub-sectors posted a mixed bag with tractors down 41% YoY, while trucks & buses up 54% YoY.

Though we maintain Neutral stance on the sector, 1) better demand dynamics (higher consumer financing, above expected GDP growth) and 2) favorable currency movement (strengthening of Rs versus JPY) may make us revisit our stance.

4-wheelers up 129% YoY: Growth trajectory remained intact as volumes in the passenger cars & LCV segment grew by 129% YoY in Jul’15. Strong consumer interest in the new Corolla model and government induced demand (Ravi and Bolan) pushed volumes up significantly. On a MoM basis, however, volumes fell by 11%, mainly due to floods. However, we see this as a temporary phenomenon and expect pickup in volumes in the coming months.

While Rozgar scheme fuelled demand for Bolan and Ravi, up 212% and 326% YoY, constituents in the passenger segment also demonstrated healthy growth. The 1300cc segment went up by 160% YoY, primarily attributable to Corolla, up 475%, and Honda City, up 80% YoY in July’15, while the 800cc segment posted 77% YoY growth in July’15.

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