Ghandhara Nissan: Making hay while the sun shines

July 27, 2021 (MLN): With a significant turnaround last year, the auto industry witnessed a rising sport utility vehicle (SUVs) trend among the masses. Ghandhara Nissan Limited (GHNL) is also planning to introduce Chery SUV (possibly Tiggo-5X or Tiggo-8), with a production capacity of 5k units per annum.

It is expected to start production from Feb-22.

To note, KIA (Lucky Motors) introduced Sportage last year which became a huge success in a very short span. Since then, every new player has been trying to penetrate in the market via introducing an SUV (i.e., BAIC, HAVAL, KIA, Hyundai, MG and Peugeot). The rising SUVs trend is also dominated by the minimal price difference between sedan and SUV, ranging between 10-20%.

According to the research report by Insight Securities, Chery will contribute PKR10-12 per share to the company’s bottom-line (assuming 1500 vehicles/annum). In addition to this, for smooth availability of spare parts and better customer services, GHNL is seeking applications for the potential 3S dealership in Pakistan through its social media platform. It is believed that, by having 3S dealerships company will be able to market their cars (possibly trucks also) more efficiently which will ultimately result in higher volumetric sales.

After the ease in Covid related lockdown, the light commercial vehicle (LCV) and heavy commercial vehicle (HCV) segments witnessed significant growth. During FY21, total truck sales increased by 19.6%, while pickups & LCVs increased by 56.9%. Similarly, GHNL sales also increased by 100% during the said period, thanks to rising economic activity and uplift of covid restrictions in the country.

The Company has a wide range of pickups and trucks namely i.e. JAC, Dong Feng and Renault. Having said that, over 90% of Pakistan's freight transportation uses the country’s road network; hence, the country relies heavily on LCVs and HCVs. So, the rise in LCVs and HCVs sales are directly correlated with economic growth. The report believed that increase in cement demand, CPEC 2nd phase and many other infrastructural projects will uplift LCVs and HCVs segment.

Pakistan, so far, is the only country in the region where trucks still fail to comply with government-imposed limits on axle load. However, relaxation from govt is also the reason behind this, as limiting the axle load will substantially increase freight rates, leading to inflationary pressures. As per the management, implementation of axle load policy will create significant demand for additional trucks and benefit local assemblers, wrote Saad Hanif, Research Analyst at Insight Securities.

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