The net profit of auto assemblers (cars and light commercial vehicles only) has declined by 61 percent to Rs 828 million in the quarter ended June 30, 2008 as compared to Rs 2.1 billion in the same period in 2007.

"In line with the economic slowdown, the auto assemblers in Pakistan showed a dismal performance", Bilal Hameed, an analyst at JS Global Capital Limited said and added that the declining volumetric sales amid rising costs were the main reasons behind this low level.

He said that the halt in auto financing facilities, political impasse, mounting inflation and rising car prices have led to a substantial decline of 14 percent in volumetric sales.
Higher product prices, however, gave some support to the top line as sales fell by only 6 percent. Adding to the problems was the increase in the cost of sales causing a 700bps decline in gross margins for the sector to 4.9 percent. The costs rose primarily due to 26 percent yen appreciation against rupee on year-on-year basis. Moreover, international steel prices increased sharply in the past one year causing rise in raw material costs.

Hence, net profits for the sector declined from Rs 2.1 billion in April-June 2007 to Rs 828 million in April-June 2008, a phenomenal decline of 61 percent, he said. The two leading auto assemblers, Indus Motor and Pak Suzuki showed lacklustre performance in the last quarter. Indus showed a volumetric sales growth of 2 percent in the quarter.

Pak Suzuki's unit sales fell by 18 percent. The companies witnessed high cost of sales as the cumulative cost per unit went up to Rs 549,000 in April-Jun 2008 as compared to Rs 456,000 during the same period last year. Therefore, profits fell by 51 percent and 69 percent for Indus Motor and Pak Suzuki, respectively. Honda Atlas, however, posted an increase in earnings of 76 percent as the company improved its profits of Rs 20.2 million in April-Jun 2007 to a net profit of Rs 35.6 million in April-Jun 2008.