July 29, 2020 (MLN): Depressing volumes, higher prices, problematic exchange rate, and an unpredictable future. These are just some of the terms that have become synonymous with the automobile sector. While these problems may very well be present in other major sectors of the country as well, the only difference is that they can easily blame it all on the COVID-19 pandemic whereas the auto industry cannot.
While some of the companies have already announced their financial results, the outcome of the remaining is awaited. Most of the projections that have been put forth by brokerage houses have showcased a very gloomy and unrepairable picture of the sector, as the issues pertaining to lower sales, higher finance costs and rupee devaluation continue to haunt it.
Amidst all this chaos, there is one such auto company that is fighting against all odds and doing somewhat well for itself. Kia Lucky Motors, which is a joint venture between Yunus Brothers Group and Kia Motors, has been at the receiving end of highly impressive responses from the market because of its recent product launches i.e. Sportage in July and Picanto last year, as well as upcoming endeavors.
A research note by Topline Securities has stated that the company is booking around 1,500 to 2,000 cars per month, which translates into sales of almost 18,000 to 24,000 units in a year. The launch of up to four other models is also in the pipeline before June, 2021, as that is when the company will be able to benefit from low tariff benefits of the Automotive Policy 2016-2021.
One of these four news models, KIA Cerato, is likely to see the light of the day by the end of this year. In overseas markets, the Cerato model comes in various engines and transmission options, therefore the details about the model being launched in Pakistan are not exactly clear. As per some media reports, KIA Cerato, the price of which is likely to be within the range of Rs. 3 to 3.7 million, will give tough competition to the likes of Honda Civic and Toyota Corolla.
Besides this, the policy will also allow KIA to import duty-free plant and machinery with 10% customs duty on non-localized parts and 25% on localized parts for up to five years. This gives the company an added benefit as the rest of the local players such as INDU and HCAR have to pay customs duties of 32.5% on non-localized parts and 50% on localized parts.
Topline has also projected a profit of around Rs. 2.2 billion for the company in FY21E, which is highly backed by the fact that KIA has a 10 years tax holiday due to its presence in Bin Qasim Industrial Park, another advantage that its local peers do not have. The company has also received a temporary subsidized relief financing of around Rs. 2 billion from the Central Bank.
In addition to the above-mentioned factors that are helping the company to create a space for itself in the highly dominated industry, the fact that KIA offers lower pricing on its cars, especially Sportage whose price is almost 37% lower than the available substitutes, is also helping it in giving fierce competition to all the high and mighty of the industry.
Copyright Mettis Link News
36021
