Pakistan’s auto sector is expected to deliver robust earnings growth in 2QFY26, with aggregate profits of Rs14.7 billion, marking a 35% year-on-year increase compared to Rs10.9 billion in the same quarter last year. The earnings momentum is being driven by higher vehicle volumes, easing interest rates, and the rollout of new product variants.

On a quarterly basis, sector profitability is projected to improve by 19%, reflecting strengthening economic activity and improving consumer demand. According to an earnings preview by Topline Securities, total net sales of auto assemblers are forecast at Rs161.5 billion, up 63% YoY and 26% QoQ, supported by higher volumes and a relatively stable Pak Rupee.

Total vehicle sales increased 45% YoY and 36% QoQ to 27,821 units during the quarter. Passenger car volumes for Indus Motor, Honda Atlas Cars, and Sazgar Engineering Works surged 84% YoY and 17% QoQ to 21,486 units, indicating a strong rebound in car demand.

Despite solid topline growth, sector gross margins are expected to ease slightly to 18.63%, compared to 19.27% in 1QFY26, due to a shift toward lower-margin variants and rising cost pressures, including the impact of the carbon levy.

Notably, December vehicle sales rose 39% YoY, defying the usual year-end slowdown when buyers delay purchases for January registration. This trend points to pent-up demand that is likely to support volumes in the coming quarters.

On a company-specific basis, Indus Motor (INDU) is expected to report earnings per share (EPS) of Rs81.97, reflecting 32% YoY growth, though marginally lower on a quarterly basis. Honda Atlas Cars (HCAR) is projected to post EPS of Rs9.83, up 2.5 times YoY and 89% QoQ, while Sazgar Engineering Works (SAZEW) is expected to deliver EPS of Rs76.31, up 92% YoY, along with a projected dividend of Rs15 per share.

Millat Tractors (MTL) is expected to report EPS of Rs11.21, down 26% YoY, although earnings are forecast to rebound sharply on a quarterly basis as tractor volumes gradually recover.

In the two-wheeler segment, Atlas Honda (ATLH) continues to lead the market, with expected EPS of Rs43.58, up 34% YoY and 12% QoQ, supported by record quarterly sales of 423,651 units.

Overall, the outlook for Pakistan’s auto sector remains positive, with new model launches, declining interest rates, and rising auto financing penetration expected to sustain demand and earnings growth over the medium term.