Pakistan’s Auto Industry: Strong Finish to FY25 and a Promising Start to FY26

Pakistan’s car industry is expected to wrap up the year (FY25) on a high. Despite rising costs and currency pressure, most automakers are likely to post healthy profits for the last quarter (April–June 2025). Let’s take a look at what’s fueling this rebound, and what might come next.

What happened in FY25?

Big Profit Jump:
Auto companies are forecast to earn Rs13 billion in 4QFY25, which is:

• 33% higher than the same quarter last year
• 60% more than the previous quarter

Full-Year Growth:
For the full year, the sector is expected to post Rs44.9 billion in total profit, up 77% compared to FY24.

Improving Margins:
Gross margins (how much money companies keep after production costs) improved to 17.5% from 14.7% last year.

Why the strong comeback?

Several key drivers boosted performance:

• Higher Car Sales: Improved economic activity and strong demand, especially for new models like the Toyota Yaris facelift.
• Lower Interest Rates: Easier car financing helped many buyers return to showrooms.
• Cost Management: Automakers benefited from falling raw material and freight costs.
• Stable Currency: Even with some pressure from a weaker PKR, companies managed their costs well.

Top performers this year

• Indus Motors (INDU): Riding on strong Toyota sales, especially Yaris.
• Sazgar Engineering (SAZEW): Still leading in hybrids despite some delivery hiccups.
• Honda Atlas (HCAR): Car sales are up 68%, though margins took a hit due to currency pressures.

Each of these companies is expected to pay dividends, rewarding shareholders for sticking around through a tough cycle.

What to expect in FY26?

The outlook for the new fiscal year looks bright:

✅ Lower interest rates may boost car loans even further
✅ Government support for electric and hybrid vehicles (EVs) could spark fresh demand
✅ Car financing schemes and better access to credit will help
PKR depreciation remains the biggest risk, it can hurt profit margins by raising import cost

FY25 marked a strong comeback for Pakistan’s auto sector. Sales were strong, costs were under control, and margins improved across the board.

As we move into FY26, investors and carmakers will keep a close eye on:

• Exchange rates
• EV policy updates
• Consumer demand trends

If these factors stay favorable, the rally in auto stocks may still have room to run.

Source: Foundation Securities

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →