Autos: 3QFY22 profits decline despite stable margins

Karachi, May 27, 2022: Despite rounds of price increases the auto sector’s combined PAT declined to Rs 4.9bn (-15% QoQ) during the 3rd Quarter of Financial Year 2022 due to higher finance and operating costs.

On gross levels, the automakers were able to prevent further deterioration in margins as the full impact of price hikes in Nov-2021 took effect during 3QFY22 averaging sector’s gross margin at 5.4%, similar to 2QFY22 levels.

“We expect volumes to take a dip by 25% in the coming quarters, while margins are expected to remain close to current levels gaining support from aggressive price hikes announced in April and May-2022,” said Wasil Zaman at JS Research.

OEMs’ results

HCAR released its MY22 results yesterday. HCAR also witnessed a sharp decline in earnings by 56% QoQ over higher operating expenses and effective tax rate.

INDU, on the other hand, posted a higher PAT (up by 8% QoQ) supported by a substantial rise in other income.

Robust sales volume keeps net sales elevated

During the quarter, the 3 OEMs witnessed stable volumes posting a growth of 3% QoQ to 65,673 units. PSMC and HCAR witnessed positive movement in sales by 7%/1% respectively owing to recent model launches despite tough industry conditions while INDU posted a decline of 5% QoQ showing some signs of weakness in demand.

As a result, combined revenue of the big 3 auto makers witnessed a similar growth of 3% QoQ during 3QFY22.

Nov-2021 price hikes prevent further erosion of margins

During 3QFY22, the auto makers were able to prevent further deterioration in the margins as the full impact of price hikes in Nov-2021 took effect.

Margins during the 3QFY22 clocked in at 5.4%, holding the margins levels witnessed during 2QFY22. To recall, with the continuous devaluation of PKR and escalating freight rates, gross margins of the auto sector were significantly dented during 2QFY22 (lowest since Sept-2019, ignoring the COVID-19 lockdown quarter) clocking in at 5.3%.


With growing concerns on multiple fronts such as rising production costs amid PKR devaluation and 5-6x higher freight rates YoY along with measures taken by the regulatory authorities such as increase in taxes on vehicles, SBP curbs on auto financing, demand in the near term looks grim and a decline of 25% during FY23 YoY is anticipated.

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