Toyota Pakistan Venture Sees Corolla Sales Drop as Imports Surge

Toyota Motor Corp. (7203)’s Pakistan venture expects demand for its best-selling Corolla to fall from last year’s record, hurting profit, as used-car imports rise.

“The problem of used cars is absolutely enormous,” Parvez Ghias, chief executive officer of the Karachi-based unit Indus Motor Co., said in a Sept. 28 interview. “This will have a very significant dent on profits.” He declined to give an estimate of how much profit and sales might be affected.

Pakistani consumers are shunning locally assembled vehicles including the Corollas Indus makes because used imports cost less and are available in a greater variety of models. In January 2011, the government increased the age of used cars allowed to be shipped into the country from 3 to 5 years, encouraging imports and hurting local sales.

The price of locally made cars has increased 15 percent in the past year because of the increase in steel prices in Japan and the rupee-yen disparity, said Atif Zafar, an analyst at JS Global Capital Ltd. The market share of imported cars may grow to 30 percent from 24 percent in the year started July, he said.

Net income rose 59 percent at Indus to a record 4.3 billion rupees ($45.3 million) in the year ended June on a surge in sales of the Corolla, compared with 2.74 billion rupees a year earlier. Toyota’s Corolla has been Pakistan’s biggest selling car since 2008 when it over took Suzuki Motor Corp.’s Mehran hatchback, according to the Pakistan Automotive Manufacturers Association.

Indus, which has gained 26 percent this year in Karachi trading, fell 0.5 percent to 255 rupees as of the Sept. 28 close. The benchmark KSE100 Index (KSE100) has risen 39 percent this year.

Used Imports

Pakistan used car imports jumped threefold to 56,000 units in the year ended June from 18,000 a year earlier, said H.M. Shahzad, chairman of the All Pakistan Motor Dealers Association.

Indus will produce 10,500 cars in the quarter ended Sept. 30 against a target of 15,000. The company produced 53,000 cars last year, according to Ghias. Sales may fall to 44,000 units in the year ending June, he estimates.

Pakistani importers are lobbying the government to increase the age limit for imported cars to seven years, Shahzad said, while Indus Motor and rival assemblers have said the age should be restricted to three years.

“We’ve spoken with the deputy prime minister who is also the minister for industries and we are hopeful the government will reverse the decision,” Ghias said. “Since July, we shut down the plant for 15 days and may have another 15 days shutdown by December.”

Indus will introduce the Fortuner sport-utility vehicle in March and expects to sell as many as 2,500 units a year, Ghias said. The company is also testing a Corolla hybrid for possible sale in Pakistan, he said.

To contact the reporter on this story: Khurrum Anis in Karachi at kkhan14@bloomberg.net; Faseeh Mangi in Karachi at fmangi@bloomberg.net;

To contact the editor responsible for this story: Young-Sam Cho in Tokyo at ycho2@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.