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Auto sector records handsome growth in 1998-99

RECORDER REPORT

KARACHI: The automobile sector in Pakistan recorded tremendous growth in 1998-99 as 46,900 cars were produced, showing a nine percent increase mainly because of abolition of capital value tax, rationalisation of duty structure and sufficient liquidity.

During last fiscal year, the automobile sector comprising four manufacturers recorded an appreciable growth. Four new automobile manufactures, a Russian an European and two from South Korea have announced their production and marketing plans. A manufacturer has already announced to market 850 cc cars from this year. It would carry a wide choice to users beside increasing the competitiveness in cost, a leading manufacturer said.

The brisk car sales was attributed mainly to abolition of CVT on locally assembled cars, reduction in custom duty on completely knocked down (CKD) kits from 40 percent to 35 percent, depreciation of yen and excess liquidity that gave stimulus to the local demand.

In 1998-99 Japanese yen depreciated by 31 percent against the rupee. The depreciation was attributed to the continuous weakness of yen against the US dollar. This trend is however not expected to continue in 1999-2000 because of yen's strength against the greenback. The increase in yen value will result in higher cost of production in the current fiscal year.

According to the annual report of Suzuki, the company sold 31,296 units in 1998-99 against 32,601 a year ago. The net sales moved to Rs 8.914 billion in 1998-99 from Rs 8.6890 billion of 1997-98. The gross profit as a percentage of sales improved from 6.7 percent to 7.4 percent. In absolute terms it increased by Rs 84.470 million. This improvement was the result of discount allowed by Zuzuki Motor Corporation, Japan, on purchase of CKD kits following the change in terms of payment implemented from credit to cash basis.

The profit after taxation in 1998-99 amounted to Rs 263.347 million from Rs 357.753 million a year ago.

Indus Motors, manufacturers of Toyota, in its annual report said in 1998-99, the gross profit of the company amounted to Rs 735.799 million and net profit after tax of Rs 251.289 million, after providing for substantially higher current and deferred taxation of Rs 189.110 million and Rs 60.911 million respectively.

The sales of the company increased from Rs 4.974 billion in 1997-98 to Rs 6.958 billion, representing a growth of 39.89 percent. The gross profit percentage increased from 8.97 percent to 10.57 percent.

The gross profit of Honda Motors was Rs 343.168 million or 13.4 percent of sales compared to 10.79 percent previous year. This gain was due savings in material cost and higher localisation. The net profit before tax thus improved to Rs 239.305 million in 1998-99 as compared to Rs 158.179 million last year.

The earning per share (after tax) was Rs 4.95 against (before tax) of Rs 3.77. The sales of the company were Rs 2.561 billion in 1998-99 against Rs 2.763 billion last year.