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The recent discovery of Pakistan automobile market.


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Local and foreign automakers have lined-up to take advantage of the benefits offered by ADP-II before its expiry on June 30, 2021, having already attracted foreign investment of over $1bn to date. Simultaneously, all eyes are set on the next ADP that is expected to incentivize localization and introduce a comprehensive Electric-Vehicle policy in line with the global trends of environmental conservation.

Even under the current ADP, the automobile manufacturers were allowed to import a certain amount of completely built units to test the market and the response, and then the companies were supposed to set up manufacturing in the country.

This led to high competition picking up by the end of 2020 and has continued to the day, as manufacturers want to avail the tax and duty relaxation before they expire in June 2021. According to AKD, the total investment under this policy has been $1 billion.

The already established oligopoly between Japanese automobile manufacturers like Suzuki, Honda, and Toyota is getting competition from the new Korean and Chinese entrants in the markets, offering better if not comparative features at much better rates.

According to AKD, the core affluence market for premium sedans faces competition from  Hyundai Elantra and expected KIA Cerato as well as from compact SUVs including KIA Sportage, Hyundai Tuscon, DFSK Glory 580 Pro, Proton X70, MG ZS, and MG HS (currently only CBU).

The small city-car section dominated by Pakistan Suzuki’s cultus and Mehran has received competition from new entrants like Kia’s Picanto, United’s Bravo and Alpha, and Prince’s Pearl.

The first one to poke the Big 3 in Pakistan was Korean KIA, who in partnership with local Lucky Motors, launched a compact crossover in July 2019 named ‘KIA Sportage’, followed by the city car, “KIA Picanto” in August of the same year. According to AKD, “the KIA Sportage continues to receive an overwhelming response from the local market, primarily because of it being priced in line with premium sedans, with average monthly sales of 1,500 units.”

Similarly, this year, the company launched premium SUV Sorento to compete with Toyota’s Fortuner. The company became the third-largest automobile company after crossing the Honda Atlas in January.

Hyundai, another Korean company also returned to Pakistan in partnership with Nishat in 2017 and set up manufacturing in the country. The company entered the crossover segment after launching Tuscon in August 2020. According to AKD, 500 units of the crossover were sold in February.

This month the automobile manufacturer announced the launch of a premium segment sedan, Hyundai Elantra in the 2.0L variant. The positive reception of these entrants is likely to make the core affluence market of premium sedans more competitive.

Other than that, Chinese Changan entered the country in partnership with Mater Motors introduced its sedan called Alsvin in January 2021. It is the cheapest sedan in the country. The plant has an annual production capacity of 30,000, twice that of KIA’s.

According to AKD, Sazgar, the only listed Auto-Rickshaw manufacturer in Paki-stan, partnered with Beijing Automotive Industry Company (BAIC) to introduce 3 BAIC cars namely an off-roader, BAIC BJ40 Plus, a compact crossover, BAIC Senova X25 and a hatchback, BAIC Senova D20 in Pakistan.

Moreover, the Chinese SAIC along with JW Automobiles Pakistan has launched MG cars in Pakistan. Until now MG Pakistan has imported only CBUs from China including two types of crossovers namely MG HS, MG ZS, and is expected to import other models as teased by CEO MG Pakistan Javed Afridi. Reportedly, the company is also setting up manufacturing in Pakistan.

There is also the sedan launching in Pakistan, namely, “Proton Saga” by the Malaysian automobile manufacturer, ‘Proton’ on the 4th of April. Last month’s reports by the government state that the assembly plant will be set in the country by the end of June.

Analysis

Notwithstanding Pak Suzuki’s sustainable sales, Toyota Indus Motors remains the preferred player according to the analysis by AKD securities. The manufacturer is a trusted brand with a strong dealership network across the country and popularity in the resale market gives it an edge.

“High historical gross margins confer INDU the power to keep prices low and stimulate demand through extensive advertising and promotion, thereby preventing newcomers from taking up its market share,” says the analyst’s report.

It must be noted that automobile manufacturers’ sales have increased 41 percent Year-on-Year over the last two months.


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Batool Imami

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