Pak Suzuki increases car prices by 3%

KARACHI: Pak Suzuki Motor Company (PSMC) – Pakistan’s top car maker by market share – has increased prices by 3% with effect from August 1, according to information given by official dealers.

It translates to a price hike of between Rs20,000 to Rs30,000 on all its car models.

The company’s share price increased 3% on Monday, finishing at Rs413.5. The benchmark-100 index also went up 0.69% in a bullish day for investors.

This price increase is the first of 2016 that affects every model with the company increasing the price of its Suzuki Wagon R variant by 2% earlier in the year.

When contacted by The Express Tribune via phone, Pak Suzuki’s spokesperson Shafiq Shaikh promised to revert in 10 minutes. However, he did not respond despite repeated phone calls.

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Analysts say this will help the PSMC maintain its margins. Due to the recent appreciation in Japanese yen, which picked up pace in the wake on Brexit, the company’s margins in the first half of 2016 (1H2016) were 10% compared to 14% during 2015, according to a Topline Securities report.

Some analysts expected the price increase. “We had already assumed a price increase of 3% for third quarter of 2016 (3Q2016),” the report said on Monday.

It added that the PSMC will likely increase prices by another 2% during the remainder of the year. “We forecast the company to maintain margins of around 10-11% during second half of 2016 (2H2016).”

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Last week, Pak Suzuki announced its second-quarter (Apr-Jun 2016) results and posted a profit of Rs488 million, down by a massive 67% from Rs1.47 billion in the same quarter of last year.

According to Topline Securities, the result was below market expectations.

Sales fell 7% year on year to Rs19 billion in the second quarter of 2016 (2Q2016). This decline was mainly due to drop in volumetric sales post culmination of Apna Rozgar Taxi Scheme of the Punjab government.

PSMC’s sales in the outgoing quarter were 26,011 units, a decline of 19% year on year (down 11% year on year to 56,192 units in first half of 2016 (1H2016).

Excluding taxi units (Ravi and Bolan), sales were robust as they increased 23% year on year to 16,911 units in 2Q2016 (17% year on year to 34,864 units in 1H2016).

Any adverse exchange rate movement, implementation of international safety standards, and reduction in import duty are key risks for the company, the report added.

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