April 09, 2021 (MLN): Since ADP-II is going to expire on June 30, 2021, local and foreign automakers have lined up to avail maximum benefits and incentives in terms of production.
Given the scenario, local Pakistani companies are facing healthy competition at their end which obviously pushes them to further improve both the quality and quantity of vehicles as new entrants are landing in the market.
To recall, in order to boost the investment volume in the sector, the Board of Investment, Pakistan formulated Automotive Development Policy (ADP) 2016-2021 encompassed attractive incentives for investors including Duty-free import of plant and machinery, a certain number of vehicles imported for test marketing on 50% duty, concessional rate of customs duty and import of parts at prevailing customs duty. And hence, ADP has attracted cumulative foreign investment of over $1bn till March’21.
The latest round of competitive pressures in the domestic auto landscape began with the return of South Korean auto giant KIA in partnership with Lucky Group. Lucky Motors launched a compact SUV, KIA Sportage in July’19 and a family hatch-back, KIA Picanto in Aug’19. KIA Sportage is getting an overwhelming response from the local market with average monthly sales of 1500 units mainly because the price is in line with premium sedans, Ammar Javed, Research Analyst at AKD Securities said.
This year, Lucky Motors entered the premium SUV segment previously dominated by Toyota Fortuner, by launching KIA Sorento. Overall, the company sold 2,500 cars in January, surpassing HCAR to become the third-largest player in the industry. Going forward, Lucky Motors plans to launch KIA Cerato in the sedan segment by June’21.
Meanwhile, a noteworthy development is possible inroads to assemble Peugeot 2008.
Hyundai, another South Korean Auto Manufacturer also returned to Pakistan in 2017 as Hyundai Nishat Motors Pvt. Ltd. setting up a manufacturing plant with an annual production capacity of 15,000 units. The company entered the PC segment with the launch of a compact SUV, Hyundai Tuscon in Aug’20 that sold over 500 units in Feb’21. Recently, the company 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 sedans’ market value more competitive, the research highlighted.
Similarly, Changan, a Chinese Automobile Company made a partnership in 2018 with Master Motors to avail the incentives offered under the umbrella of ADP-II. They introduced an entry-level sedan which is relatively cheaper in price across Pakistan. In line with this, Sazgar, the Auto Rikshaw manufacturer has signed a partnership with Beijing Automotive Industry Company (BAIC) and introduced 3 BAIC cars namely an off-roader, BAIC BJ40 Plus, a compact crossover, BAIC Senova X25 and a hatchback, BAIC Senova D20 in Pakistan. It is expected that SAZGAR will operationalize its assembly plant in Pakistan within April 2021 with an annual capacity of 24,000 cars.
While Pak Suzuki Motor Company Limited (PSMC) may continue to sustain healthy sales in the near term driven by lower interest rates, INDU remains the preferred player in the sector on the back of a strong dealer network and as well as commanding presence especially in the rural market, giving it a competitive advantage, the research analyst said. In addition, high historical gross margins confer INDU to keep prices low and stimulate demand through extensive advertising and promotion, thus preventing new entrants from taking up its market share.
The aforementioned outlook reported by AKD painted a favorable scenario for the auto sector of Pakistan in the times to come. All eyes are set on the next ADP that is expected to incentivize localization. Further, the response of the big 3 players namely Indus Motors, Pak Suzuki and Honda Atlas that constitute almost 90% of the Passenger Cars (PC) & LCV segment will also play a key role to determine the future direction of the industry.
Copyright Mettis Link News
40614
