HCAR's new City variant to help the company retain its market share

September 3, 2020 (MLN): The Chief Financial Officer of Honda Cars Atlas Pakistan, Mr. Umair Wajid, recently spoke about the challenges as well as the opportunities faced by the company in recent years, during a webinar arranged by Alfalah CLSA.

The CFO apprised the investors about the decline in volumetric sales witnessed over the last two years, due to the consistent depreciation of the local currency, higher interest rates, and the overall economic slowdown in the country. The situation further worsened during the imposition of lockdown, wherein the company sold just 263 units during the period Apr-May, 2020.

Nonetheless, the CFO said that the lifting of lockdown had resulted in not just recovery of sales but new opportunities for the company. The inventory build-up which had resulted from lower demand during the months of lockdown will now be used by the company to meet the demand in upcoming periods. All in all, the management of the company is expecting around 10% growth in volumetric sales over the next three years.

The CFO also shares his two cents over the competition that the Honda Cars are facing against the newly launched cars by Toyota (Yaris), KIA Motors (Sportage and Cerato), and Hyundai Nishat (Tucson). He said that the new variant of City is overdue, which will help the company retain its market share. The company is also contemplating entering into the SUV segment, he added.

Speaking of the competition these rival companies posed to the wellbeing of City and Civic, he said that the cars launched by KIA and Hyundai will be seen as a substitute to luxury vehicles imported into Pakistan, instead of those manufactured locally.

Talking about the Foreign Exchange risk, Mr. Umair said that most of HCAR’s imported materials came from Thailand, which means that the company is exposed mostly to the changes in the exchange rate of USD/PKR. Moreover, he said that the exchange rate is likely to remain stable in the short to medium term, so any price increase from now onwards will lead to an expansion in gross margins.

The CFO also spoke regarding ongoing expansions of the business operations, stating that the company during last year had extended its dealerships across the country by around 10%. The company might also increase its dividend payout rate, which currently stands at over 20%, lest there is an increase in earnings.

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