Indus Motors Sees Car Sales Growth with Falling Interest Rates

Staff Report:
INDUS Motors management expects a fall in interest rates and inflation, leading to an anticipated increase in car volumes. However, this outlook is highly dependent on political stability and other macroeconomic factors.

Indus Motor Company (INDU) conducted its FY24 analyst briefing, where management discussed financial performance and future outlook.Car Sales in Pakistan Rises 15% in August 2024

With interest rates expected to remain under control, auto financing has become a favorable factor. The contribution of auto financing to sales has decreased from 30% to around 13-14%. Declining interest rates and improved auto financing conditions are likely to positively impact the overall auto market, according to management.

Toyota offers hybrid and electric vehicles globally and has the capability to launch them in Pakistan. However, the company is currently prioritizing hybrid vehicles until necessary structural changes are in place to ensure a smoother transition for customers to electric vehicles.

The hybrid segment in the auto sector is expected to experience growth in the coming year, aligning with the company’s goals.

The recent price decrease for the Corolla Cross is part of a limited-time promotional deal, available only while quantities last, as part of a one-year anniversary offer. Management expects this promotion to reach the threshold booking size in the next 15-20 days.

Corolla, Yaris, and Cross models have a localization rate of 50-65%.

INDU’s production capacity has reached 75,000 units; however, it is operating much lower than capacity due to market saturation.

The board of INDU has approved an additional Rs1.1bn, bringing the total to Rs4.1bn, to further localize parts and components for existing vehicles. This initiative aims to reduce production costs and lower the import bill.

In December 2023, the company launched the much-anticipated Toyota Corolla Cross, featuring the highest localized content for a hybrid vehicle in the entire auto market. This launch contributed significantly to the company’s positive results.

Used imported car sales increased to 38,561 units in FY24 compared to 6,595 units in FY23, marking a 485% increase. The significant rise in used import cars is due to the government’s relaxation in duties and taxes.

To recap, INDU announced earnings of Rs5.7bn (EPS of Rs72.08), up 48% year-on-year in FY24. INDU declared a final cash dividend of Rs43 per share, bringing the FY24 total payout to Rs114.7 per share.