Pakistan’s Compact Car Sales More Than Double in October Amid Fuel Price Shock

Sales of smaller-engine vehicles in Pakistan more than doubled in October, with analysts attributing the surge to rising demand for fuel-efficient cars amid persistently high fuel costs following the outbreak of the Iran conflict.

According to Pakistan Automotive Manufacturers Association (PAMA) data, registrations of vehicles with engine capacities under 1,000cc increased 118 percent to 11,885 units, up from 5,447 units a year earlier. The growth was led by Suzuki Alto sales, which jumped 130 percent to a record 11,363 units, while Suzuki Every, a 660cc microvan, rose 1.2 percent to 522 units.

Petrol prices climbed to a record Rs458.41 ($1.66) per liter on April 3 from Rs266.17 ($0.96) before the conflict, while high-speed diesel surged 85 percent to Rs520.35 ($1.88) from Rs280.86 ($1.02), according to the Oil and Gas Regulatory Authority (OGRA). Although both have since declined—petrol to Rs330 ($1.20) and diesel to Rs360 ($1.30) as of OGRA’s November 13 notification—the initial spike reshaped consumer preferences.

The fuel-price surge followed the outbreak of the US-Israel conflict with Iran on February 28, which disrupted energy markets and increased transport costs across Pakistan and other nations.

Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., noted that both the Alto and Swift posted record monthly sales of 11,363 and 3,214 units, respectively.

Suzuki Swift, belonging to a larger engine-capacity segment, saw sales increase 175 percent in October, while the 1,000cc Suzuki Cultus rose 46 percent to 753 units.

By contrast, several larger-engine models recorded declines. Combined sales of the Honda Civic and City fell 14 percent to 1,933 units, while Toyota Corolla, Yaris, and Corolla Cross declined 7 percent to 3,496 units. Hyundai Sonata sales dropped 62 percent to 17 units, according to PAMA data.

Ghani stated that demand for smaller vehicles has remained strong despite higher borrowing costs, noting this trend occurs “despite higher interest rates, which suggests cash buyers, first-time car owners upgrading from motorcycles and families downgrading from 1,300cc-plus cars.”

The State Bank of Pakistan raised its benchmark interest rate by 50 basis points to 12 percent in October, citing inflationary pressures stemming from intensifying hostilities in the Middle East. Higher interest rates typically make vehicle financing more expensive, potentially discouraging purchases through bank loans.

However, industry representatives and other analysts cautioned against attributing the changing sales pattern solely to rising fuel costs. Pakistan Automotive Manufacturers Association Director General Razi-ur-Rahman told Arab News he does not believe petrol prices are a contributing factor in the increase in sales of lower-segment cars this month, without elaborating.

An industry source familiar with the matter, requesting anonymity, said uncertainty over proposed changes to vehicle taxes is also influencing purchasing decisions, particularly in the larger-engine segment. The source noted expectations of a possible reduction in sales tax on larger-engine cars from 25 percent to 18 percent had prompted some prospective buyers to delay purchases.

The market was also anticipating higher vehicle prices following a proposal to impose a 10 percent additional development levy on internal combustion engine vehicles running on petrol or diesel, the source added.

Minhal Ali, an investment analyst at Insight Securities Ltd., suggested owners of larger vehicles might be more inclined to switch to new-energy vehicles, including electric and hybrid models, rather than smaller conventional cars. “I will not sell my Corolla and buy an Alto. I will buy some new-energy vehicle in which I have many options easily available for Rs6-7 million,” he said, referring to a price range of approximately $21,700-$25,300.

PAMA data showed an 80 percent month-on-month increase in sales of the electric Dewan Honri-V to 36 units, although the small volume offered limited evidence of a broader shift toward such vehicles.

Ghani warned that further escalation of the Iran conflict could weaken Pakistan’s automobile market by putting pressure on the rupee, increasing the cost of imported vehicle assembly kits, and potentially triggering further price increases and tighter monetary policy. “Small cars would gain share of a shrinking market,” he said.

Spokesperson for the Ministry of Industries and Production Shahzad Ali and Engineering Development Board CEO Hamad Ali Mansoor did not respond to requests for comment.

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