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Analysis of Pakistani Industry

Automobile Industry
of Pakistan
Group Members
Talha Rizwan (10016)
Muhammad Anas (10628)

2012
1

LETTER OF TRANSMITTAL
08th December, 2012

Mr.Shahid Hameed
Course Instructor, Pakistan Studies
Institute of Business Management
Karachi.
We are students of Analysis of Pakistan Industries at IoBM and have been
authorized by our course instructor Mr. Shahid Hameed to prepare a term report
on Automobile Industry of Pakistan.
We would like to thank our course instructor Mr. Shahid Hameed for such
practical knowledge that he has imparted throughout the semester. We would
also like to request to kindly accept this report.
Sincerely,
Group Members:
Talha Rizwan 10016
Muhammad Anas 10628

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ACKNOWLEDGMENT
First and Foremost we would like to thank The Almighty Allah who gave us
enough strength to fulfill this task. We are also extremely grateful to Sir. Shahid
Hameed for his immense cooperation for this project.
We would like to acknowledge Institute of Business Management for all the
support and proving such opportunity of learning, through the agony of bearing
with your demands and expectations, we truly got to discover our potentials.
Making this report has immensely helped us in understanding the industry
dynamics of Automobile Industry of Pakistan and it impact on the countrys
economy.

Thanking You,
Talha Rizwan 10016
Muhammad Anas 10628

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Contents
EXECUTIVE SUMMARY .................................................................................................. 5
INTRODUCTION ................................................................................................................ 6
OVERVIEW OF AUTOMOBILE INDUSTRY .............................................................. 7
Background.................................................................................................................................. 7
Growth......................................................................................................................................... 8

MANUFACTURING PROCESS .................................................................................... 10


Assembling Procedure ............................................................................................................... 10

STRUCTURAL COMPOSITION................................................................................... 11
PRODUCT MIX OF THE INDUSTRY......................................................................... 11
Major Product Segments ....................................................................................................... 11
Product Mix of Major Motorcycle Brands in Pakistan........................................................... 11
Product Mix of Major Car Brands in Pakistan........................................................................ 12

INSTALLED CAPACITY ................................................................................................ 12


CAPACITY UTILIZATION ............................................................................................ 13
COMPONENTS REQUIRED FOR MANUFACTURING ....................................... 14
DUTY STRUCTURE ........................................................................................................ 15
Taxation/Duty Structure-Used Cars .......................................................................................... 17

DEMAND & SUPPLY ...................................................................................................... 18


Demand for Automobiles in Pakistan ........................................................................................ 18
Supply for Automobiles in Pakistan........................................................................................... 20

MAJOR PLAYERS OF THE INDUSTRY: .................................................................. 23


Major Players in Personal Vehicle Sector .................................................................................. 23
Major Players in Motorcycle Sector .......................................................................................... 23

PORTERS FIVE FORCE ANALYSIS.......................................................................... 26


MAJOR PROBLEMS FACED BY THE SECTOR ..................................................... 28
CONCLUSION & RECOMMENDATIONS ................................................................ 30
BIBLIOGRAPHY............................................................................................................... 31

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EXECUTIVE SUMMARY
This report critically analyzes the present situation of Pakistans Automobile
Industry mainly focusing on the cars and motorcycles sector. The report provides
brief information about the history and the evolution of the auto sector in the
country.
The report also presents 5 years of data on the production and sales of the auto
industry and discusses the various active tax and duty policies. The report also
discusses the installed capacity and the capacity utilization of the overall industry.
The report includes information about the installed capacity of the various major
players of the industry.
We have also conducted a demand/supply analysis to analyze whether or not the
local manufacturers are meeting the surging demand for vehicles efficiently. We
have also taken reference from a research study conducted by the EDB and have
tried to show a direct relationship that exist between per capita income and
demand for vehicles. The report also talks about the manufacturing process of
cars and lists the generic raw materials that are required for production.
The report also discusses the product mix of the cars and motorcycles sector and
presents brief information about the various models and designs available in the
market. We also presented market share breakdown highlighting the major share
holders of the industry.
The report also analyzes the auto sector on the basis of Porters 5 forces
framework and finally highlights some of the major problems the industry is
currently facing.
We have tried our best to ensure that all the figures included in this report are
relevant and authentic.

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INTRODUCTION
Automobile industry comprises of the companies which are, in one way or the
other, involves in the designing, development, manufacturing, selling and
marketing of motor vehicles. It excludes all the deliverers and retailers of the
motor vehicles as well as the fuel companies.
Globally, it is one of the most significant industries in terms of the human capital
employed and revenues. Global Automobile industry earns over five thousand
billion dollars annually ($5,132Billion in the year 2011).
The first petrol power motor vehicle was invented by Carl Benz of Germany, who
later had it patented and began its production. After sometime another German
Gottlieb Daimler invented a motor vehicle from scratch by removing the horsedrawn carriage, which was also patented and commercially produced and sold.
But, it was not far when an Italian Enrico Bernardi invented a motorcycle, which
he later modified and made it a two seater which was able to carry two adults.
United States of America had always been the leader in automobile
manufacturing because of the excessive demand for automobile in the North
American region, until it was overtaken by Japan in the 80s by Japan. Japan
became the hub of auto manufacturing and had produced millions of cars and
sold them to the various parts of the world. Automobile remained the most
important sector of Japanese economy and played an important part in the
economic development of Japan.
Production By Countries (2011)
Rank
Country
Production
1
2
3
4

China
USA
Japan
Germany

18,418,876
8,653,560
8,398,654
6,311,318

But in 2006, China overtook Japan


to become the leading automobile
producer of the world. Today, China
produces almost the one fourth of
the worlds automobile production.

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OVERVIEW OF AUTOMOBILE INDUSTRY


Background
In Pakistan automotive assembling started in 1950, when the first Bed Ford truck
was manufactured by the newly formed National Motors Limited. National
Motors Limited was established by General Motors of USA. Since then, the
industry has grown considerably and is one of the significant sectors in Pakistani
economy. However, the country have to depend on the imports to meet the
internal demands and there is still a demand supply gap presents in this sector,
especially in the personal vehicle segment.
Despite considerable production volumes, transmission of technology and
localization of vehicle components remains short, and only some car models are
assembled in Pakistan while customers have a very small variety of vehicles to
choose from. The lack of competition in the auto industry due to the dominance
of a few players, and limitations on imports in the form of heavy duties has
resulted in inflated prices of Cars in the country. Currently some of the significant
international automakers have set up assembly plants or are in joint ventures
with local companies which includes Toyota, General Motors, Honda, Suzuki,
Nissan Motors.
In Pakistan, assembling of motorcycles began in the 1970s when Atlas Honda,
which was a joint venture between the Atlas Group and Honda Japan, started the
manufacturing of Honda CD 70 a 4 stroke motorcycle. In 1983 another company
Pak Suzuki Motorcycles entered the thriving motorcycle market. Also in 1983
PAMA which is a trade association for the automobile industry came into
existence. The original equipment manufacturers that initially joined PAMA were
Atlas Honda, Dawood Yamaha Motors and Pak Suzuki Motorcycles. In the 1990s
three more original equipment manufacturers namely, Fateh Motors, Pakistan
Cycle Industrial Cooperative Society Limited and Siagol Qingqi Motors Ltd also
joined PAMA. Currently the industry consists of over 70 motorbikes
manufacturers. The motorcycle industry is one of the only few sectors of the
economy that has managed to maintain a sustainable growth rate. The industry
reported a CAGR of 58% from 2001 to 2005. In 2005 Pakistan became the 7th
largest producer of motorcycles by producing 751,000 units and acquiring 2% of
the global market share. The industry has got deep backward and forward
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linkages with various other industries. Backward linkages includes, links with
industries such as steel, glass, plastic, rubber, paint etc. Whereas forward
linkages includes, links with industries such as dealerships, retailers, tyre
manufacturers etc. If compared to other vehicles such as cars, trucks, buses etc,
the demand for auto parts is the highest in the motorcycle industry which is 60%.
In 2008-09 the motorcycle production accounted for 75% of the total auto
production. Currently the industry has the capability of producing approximately
2,500,000 motorcycles per annum. The industry has achieved over 90%
localization and this localization has resulted in the growth of the local vending
industry and has created large opportunities for jobs in the country.

Growth
The Global automobile Production for the year 2011 was
80,092,840 units which grew by an average growth rate of
5.5% from 2005-2010. BCG (Boston Consulting Group)
proposes that, by 2014, demand for personal vehicles and
Light commercial vehicles in the four BRIC markets (Brazil,
Russia, India and China) will be the one-third of the global
demand. Other significant automotive demand lies in
emerging economies like Iran, Indonesia and South Korea.
Emerging nations already buy more cars than established
automotive markets like US and Europe. According to a study,
emerging auto markets accounted for 51 percent of the
global light commercial vehicle sales in 2010.

Personal Vehicle Trend in


Pakistan
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Production Growth
108,850
120,627
11%
175,169
45%
303,383
73%
416,189
37%
520,124
25%
467,267
-10%
660,593
41%
509,054
-23%
736,861
45%
838,665
14%
828,576
-1%

In Pakistan, personal vehicle sector has experienced an


unsettled trend primarily because of the economical
dynamics of the country and government regulations
regarding the import of the semi finished and finished goods.

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The motorcycle sector is one of the most rapidly growing sectors of the economy.
This is the only sector that has
Growth in terms of sales
managed
to
maintain
a
60%
sustainable growth rate in the
50%
past decade. The industry has
40%
maintained a growth rate of
30%
15% YoY for the last five years.
20%
The industry has achieved 95%
10%
localization. At the start of the
0%
millennium the production of
1
2
3
4
5
-10%
motorcycles in the country was
-20%
119169 units.
Currently Pakistan is manufacturing almost 2 million motorcycles. The industry is
not only meeting the local demand but has also started exporting motorcycles to
Srilanka, Bangladesh and Afghanistan and is becoming a strong source of foreign
exchange for the country. In 2011 Atlas Honda alone exported 12450 units to
various countries.

Motorcycle sector Growth in Pakistan

The industry is expected


Growth in terms of
Growth in terms of
to
show
consistent
Year
production
sales
growth, as the demand
2006-07 12%
11%
for new motorcycles
keeps on surging. To
2007-08 26%
25%
keep pace with the
2008-09 -13%
-13%
increasing demand Atlas
2009-10 50%
50%
Honda
made
an
additional investment of
2010-11 17%
17%
$35 million this year to
increase its production capacity to 750,000 vehicles annually. Yamaha is also
planning to invest $150 million in the Pakistani motorcycle industry and this will
promote the manufacturing of modern and fuel efficient motorcycles within the
country. A special incentive plan has been formulated for this purpose and a
portion of land has been allocated to the Yamaha Group at Port Qasim for Setting
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up a manufacturing facility. Pakistan has emerged as a global leader in the


production of 70cc motorcycles and it is expected that Pakistan will be among top
five countries exporting high quality motorcycles in the next couple of years. The
table below presents growth figures in terms of sales and production for the last
five years.

MANUFACTURING PROCESS
(For Cars, LCVs, SUVs and trucks)

Assembling Procedure
(Industry Practices for assembling)

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STRUCTURAL COMPOSITION
PRODUCT MIX OF THE INDUSTRY
Major Product Segments

Major Product Segments

Cars

Motorcy
cles

Trucks

Buses

Jeeps
(44)

Light
Sports
Comme
Utility
Farm
rcial
Vehicles Tractors
Vehicles
(SUV)
(LCV)

Product Mix of Major Motorcycle Brands in Pakistan


Brands
Product Mix
Atlas Honda

CD70

Pridor (100cc)

CG125

Dawood Yamaha

Junoon (70cc)

Dhoom (100cc)

Mini 100

Pak Suzuki

Raider (110cc)

SPRINTER ECO
(110cc)

SPRINTER
(110cc)

Sohrab

SD70

S100

Deluxe (125cc)

GS 150

11 | P a g e

Product Mix of Major Car Brands in Pakistan


Suzuki
800cc

Honda

Toyota

Daihatsu

Mehran

Hyundai

Cuore

Bolan
1000cc

Cultus

Santro

Alto
1300-2000cc

Liana

Civic

Swift

City

Corolla

INSTALLED CAPACITY
At present, in the personal vehicle and light commercial vehicle segments of the
automobile industry in Pakistan, there are only a few companies which are
assembling some of their models in Pakistan. Those models are the ones with the
highest demands. Other prestigious and expensive models are mostly imported.
Hence, the capacity available in this segment doesnt reflect the sales of the car.
However, it necessarily reflects the production of cars within the economy. Table
below shows the capacity available for producing cars and light commercial
vehicles.
Capacity unit/annum

Pak Suzuki Motor Co. Ltd, Karachi

150,000

Indus Motor Co. Ltd, Karachi

50,000

Honda Atlas Cars (Pak) Ltd, Lahore

20,000

Ghandhara Nissan Ltd

6,000

Dewan Farooq Motors Ltd

25,000
251,000

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At present the motorcycle sector of Pakistan consists of more than 70


manufacturers. The cumulative installed capacity of the local motorcycle industry
in 2009/10 was 1,870,000. Currently the capacity of the industry according to
APMA is 2,500,000. Table below highlights the installed capacity of some of the
major players of the industry.

Manufacturer

Installed Capacity

Atlas Honda

800,000

Pak Suzuki Motor

50,000

DYL Motorcycles

150,000

D.S. Motors

125,000

N.J. Auto Industries

125,000

Memon Motors

125,000

Metro Hi-Tech

50,000

CAPACITY UTILIZATION
In 2011-2012, Personal vehicle segment of the industry had the capacity
utilization of 61.5%. 154,255 units of cars and LCVs were produced from the
available capacity of 251,000.
In the motorbike segment of the industry the capacity utilization for the year
2011-12 was 64 percent.

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COMPONENTS REQUIRED FOR MANUFACTURING


Following are some generic components which are required for almost all kinds
of automobiles ranging from a motorcycle to a heavy duty truck.
1. Body frame: Welded frame system, assembled frame system, handles etc
2. Plastic components: Plastic component system
3. Suspension: Drive related system, rear axle, rear brake, front axle, front brake,
UBS brake, ABS brake
4. Frame suspension: Frame linkage, front fork damper, steering system
(handlebar), turning handle
5. Transmission: Differential, drive shaft, belt, chain
6. Transmission box: Auto transmission box, manual transmission box
7. Engine: Cylinder head (air inlet), cylinder system, crankshaft system,
transmission, air intake system, accessory system
8. Air intake system: Air filter, inlet tube
9. Cooling system: Radiator, reserve water tank, cooling water tank
10. Fuel system: Fuel injector, fuel tank, fuel line
11. Exhaust system: Exhaust pipe, muffler, other
12. Vehicle wiring system: Wiring diagram, main wiring, secondary wiring, ECU
line, diagnostic cable, power cable, battery cable, motor starting cable, battery
cable, grounding wire, fuse wire, charging circuit
13. Ignition system: Ignition system, ignition chip, ignition wire, spark plug cap
14. Charging system
15. Starter system: Starter motor
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16. Converter: Converter, charging socket


17. Lighting and lamp system:
Headlight, glove box light, turn signal light, rear light, license plate light, reflector,
rear window brake light, glove box light, rear position light
18. Switch system: Key lock switch, electronic switches, resistor switch, gear
switch assembly, start switch
19. Meter/indicator system: Indicating instrument, tachometer, speed meter,
wheel speed indicator, temperature indicator, oil level indicator
20. Other control and sensors: Engine stalling controller, speakers, police car
sirens group, fuses, relays, sound muddling devices, lighting, IC KEY, KCSS, wheel
speed sensor
21. Fuel injection system: Fuel injection system electronic controller, fuel pump
assembly, cooling fan assembly, nozzle, sensor
22. Other electronic components: Flash, timer, tire pressure controller,
instrument control, variable resistor, diagnostic tool, driver group, relay group,
regulator
23. Other parts: Cargo basket, rear frame box

DUTY STRUCTURE
Earlier this year the Economic Coordination Committee (ECC) decided to slash
duty on imported CKDs to 5 percent from 15 percent, on locally manufactured
CKDs to 25 percent from 47.5. Import duty on CBUs was reduced to 35 percent
from 65 percent. Import duty on import of raw materials was proposed to be
maintained at 0 percent and sub-components and components at 5.0 percent.
For the new entrants the duty on the imports of parts was cut down to 10% from
15%. It was also announced that for new entrants the duty on locally
manufactured CKDs will be 10 percent for three years. Concession for new
entrants is linked with indigenization and they will be required to achieve 20%
15 | P a g e

localization in the first year, 30% in the second year and 50% by the third year.
Duty on engine and automatic transmission will be 5 percent.
Reduction in the import duty on CBUs came as a surprise for the local
manufacturers. Pakistan Association of Automotive Parts Accessories
IMPORT DUTY STRUCTURE
Imported CKDs

5%

Locally manufactured CKDs

25%

Locally manufactured CKDs


(for new entrants)
10%
CBUs

40%

Raw Materials

0%

Sub-components

5%

Engine
and
transmission

automatic

New pneumatic
rubber

tyres

5%
of
25%

Inner tubes of rubber of a kind


used on motor cycles
25%
Sign-plates,
name-plates,
address-plates and similar
35%
plates, numbers, letters and
other symbols, of base metal

Manufacturers
(PAAPAM)
heavily
criticized the tariff reduction measures
taken by the ECC claiming that due to
adverse policy measures and the import
of used vehicles, the industry is already
suffering from excess capacity and such
reductions will further damage the local
manufacturers.
PAAPAM also claimed that the
motorcycle
industry
recorded
tremendous growth rates in the last ten
years and with proper focus the auto
sector can single handedly revive
Pakistan's industrial sector and that the
auto industry is one of the top five
industrial sectors of the country in
terms of contribution to tax revenue.
Critics also believe that the tariff
reduction measures are taken only to
accommodate
one
particular
manufacturer i.e. Yamaha, since it is
planning to invest $150 million in the
local industry.

Arshad Awan CEO of General


Engineering also criticized the decision
by saying that reduction in duty on
completely built-up units would boost
imports of the two-wheelers and
definitely hurt the local motorbike industry. He also added that China which is
Taps, cocks, valves and
similar appliances for pipes,
boiler shells, tanks, vats or
the like
35%

16 | P a g e

the largest producer of motorcycles in the world with a production level of 27


million units in 2010-11 maintains a 90% custom duty on CBU imports, under
strict monitoring and regulation by the Chinese government.
The table below presents the import duty figures for CBUs and CKDs from the
year 2001 to 2011.
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

CBU's 105% 90%

75%

75%

75%

75%

65%

65%

65%

65%

65%

CKD's 25%

20%

30%

30%

30%

47.50% 47.50% 47.50% 47.50% 47.50%

25%

The government has also discontinued the duty drawback facility and this has
negatively impacted the exports of motorcycles. Pakistan mainly exports to
Afghanistan and due to the withdrawal of the duty drawback the country is
experiencing a decline in exports. Atlas Honda exported 13000 units to
Afghanistan in the fiscal year 2011-12, but due to discontinuation of the policy
they only managed to export 1000 units in the first three months of the fiscal
year 2012-13. Chairman of Association of Pakistan Motorcycle Assemblers
(APMA), Mohammad Sabir Shaikh claimed that exporters used to ship 70cc bike
at $360 to $390 per unit and that the withdrawal of duty drawback caused the
bike assemblers to raise prices to $400 to $450 per unit, which Afghanistan
deemed expensive. So, the exports of bikes to Afghanistan have suspended and
Afghanistan has started manufacturing
bikes locally.
Taxation/Duty Structure-Used
Cars
Under special regime taxes levied
covering Custom Duty, Sales Tax,
Income Tax and Capital Value Tax
based on engine capacity.

17 | P a g e

DEMAND & SUPPLY


Demand for Automobiles in Pakistan
According to a research conducted by the Freedonia Group, a Cleveland-based
research firm the global demand for motorcycles, which was 79.2 million units in
2008, will increase at a rate of 7.6% per year through 2013 to 114 million units. In
2008 82% of the worlds demand for motorcycles was from the Asia/Pacific
region. Since Pakistan is a developing economy and motorcycles are a cheap
source of conveyance, their demand is ever increasing. The total production in
2011-12 was over 1.6 million and is expected to increase to 2 million units. At a
recent forum on auto sector arranged by the Jang group, the director general of
PAMA Abdul Waheed Khan said that the country annually needs 1.5 million
motorcycles and that the industry has higher production capacities than the
current demand.

Local annual demand for various


vehicles
Cars

192,000

trucks and buses

16,000

Tractors

700,000

Motorcycles

1,500,000

Demand for motorcycles in Pakistan is often seen as a reliable measure of the


health of the rural economy and most of the motorcycles are sold in small towns
and villages. Almost 60% of the demand for motorcycles comes from rural areas
According to a survey global food prices have almost doubled in the last six years,
resulting in higher disposable income amongst many rural households. Annual
disposable income of Pakistan increased from US$ 117,254.8 in 2008 to US$
199,125.5 in 2012, so the increasing disposable income is one factor that justifies
the increasing demand of motorcycles.

18 | P a g e

Annual disposable income(US$ million)


2008

117,254.80

2009

133,040.50

2010

150,186.50

2011

187,578.60

2012

199,125.50

A research conducted by EDB somewhere in 2006 indicates a positive relationship


between an increase in per capita income and motorcycle sales. The table below relates
per capita income with increase in annual demand from the year 2001 to 2006.

Year

Per

capital Annual

income us$

demand

Population
in 000

New motorcycle %
per person

change

decrease`

units
2001-2002

492

120,627

143,825

1193

2002-03

579

175,169

146,845

838

30%

2003-04

657

371,007

149,929

404

52%

2004-05

742

570,085

153,077

269

33%

2005-06

847

751,667

156,291

208

23%

19 | P a g e

Supply for Automobiles in Pakistan

Cars and Light Commercial Vehicles


Pakistan is the 34th in the list of producing Cars and Light commercial vehicles.
Automobile industry of Pakistan is the second largest indirect tax payer in terms
of customs duty, sales tax and withholding tax (Rs 63 billion)
It s GDP Contribution to countrys economy is around US$ 3.6 billion
180,000
160,000

Production & Sales of Cars and LCV's

140,000
120,000
100,000
80,000

Production

60,000

Sales

40,000
20,000
-

2008

2009

2010

2011

2012

Production

164,710

84308

121647

133972

154255

Sales

164650

82844

123957

127944

157325

Trucks And Buses


7,000

Production & Sales of Trucks And Buses

6,000
5,000
4,000
3,000

Production

2,000

Sales

1,000
-

2008

2009

2010

2011

2012

Production

6,139

3,792

4053

3391

3165

Sales

6545

3821

4277

3457

3,003

20 | P a g e

Tractors
80,000
70,000

Production And Sales of Tractors

60,000
50,000
40,000
Production

30,000

Sales

20,000
10,000
-

2008

2009

2010

2011

2012

Production

53,256

59,968

71607

70770

48120

Sales

53,203

60351

71512

69203

49,745

Jeeps and Pickups


25,000

Production and Sales of Jeeps & Pickups

20,000
15,000
Production

10,000

Sales
5,000
-

2008

2009

2010

2011

2012

Production

22,944

17,090

16940

20025

21380

Sales

22,769

16463

17697

18553

21,814

Two Wheelers & Three Wheelers


Production from July 2011 to June 2012 including three wheelers was 1,602,702
units. The following table provides the 5 year production data of motorcycles in
Pakistan up till 2011

21 | P a g e

Category of Manufacturer

2006-07

2007-08

2008-09

2009-10

2010-11

Pakistani Assemblers total


production

424629

503278

487321

758038

904797

Non-APMA Members total


production

415221

550824

430307

622366

705884

CBU imports from China

156

Total production

839850

1054102

917628

1380404

1610681

Table below presents the production and sales figure for the last five years. These
figure indicates that the production level have always managed to exceed sales.
This indicates existence of excess capacity and that the local manufacturers are
efficiently meeting the surging demand for motorcycles.

1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
2006-07

2007-08

2008-09

2009-10

2010-11

22 | P a g e

MAJOR PLAYERS OF THE INDUSTRY:


Major Players in Personal Vehicle Sector
Pak Suzuki
Pak Suzuki Motor Company Limited was established
as a joint venture between Suzuki Motor Corporation
(SMC) of Japan and Pakistan Automobile Corporation
(PACO) in the year 1983. Commercial operations
were started in 1984 with the production of Suzuki
FX model. In 1988, Mehran and Khyber models were
also started to produce. In 1992, new plant for the
Margalla model was commissioned. In, 1998 Baleno
model took place of Margalla. And, in 2009
1millionth vehicle was produced by Pak Suzuki.
Today, Pak Suzuki is producing Swift, Liana, Cultus, Alto and Bolan models in the
Personal vehicle segment and has the highest market share of 49%.
Honda Atlas Cars Pakistan Limited
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor
Company Limited Japan and the Atlas Group of Companies, Pakistan.
The company was incorporated on 4th November, 1992 and agreement of joint
venture was signed on August 05, 1993. On 16th July 1994 commercial production
was started and the first Civic car was launched in 1996. A model of City variant
was
also
launched
a
year
later
in
1997.
Major Players in Motorcycle Sector
Atlas Honda:
The company was established in 1988 as a joint venture of the Atlas Group and
Honda Motor Company, Japan. Atlas Honda is recognized as a market leader in

23 | P a g e

the motorcycle industry maintaining a market share of almost 70% in terms of


sales. The companys plants are located in Karachi and Sheikhupura.
Companys flagship models are CD 70, CD
100 and CG 12. Beside this the Atlas Honda
also recently introduced two new models,
the new CG 125 Deluxe and Pridor. Atlas
Honda is also the first company to make use
of the Euro II technology in Pakistan.

Manufacturer

Market
Share

Atlas Honda

71%

Dawood Yamaha

10%

Hero

5%

Sazgar

6%

Net income increased from 1,002,556,000 to


1,204,109,000.

Pak Suzuki Motors

3%

Pak Suzuki Motor:

Pak Suzuki Motor Company limited was


established as a joint venture between
Suzuki Motor Corporation, Japan and Pakistan Automobile Corporation (PACO) in
1983. In 2007 the Suzuki Motorcycle Pakistan Limited merged into Pak Suzuki
Motor Company. Pak
Suzuki Motors is the
Atlas Honda
second company after
Atlas
Honda
to
Dawood Yamaha
manufacture
Hero
motorcycles based on
Euro II technology in
Sazgar
Pakistan. The company
Pak Suzuki
manufactures Sprinter
Motors
ECO, Sprinter, and GSOthers
150. They have recently
introduced a new model
called Raider, an 110cc
bike with Euro II technology. In 2011 the company also inaugurated its new plant
at Bin Qasim.
Others

5%

3rd quarter report from july to September shows a net loss of 193265000
compared to a profit of 392,666 last year
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Dawood Yamaha Group:


Dawood Yamaha is the third major manufacturer of motorcycles in the country.
The company manufactures YAMAHA motorcycles. Companys manufacturing
plant is located at Hub Chowki and the assembling plant is located at Uthal
Industrial Area, Distt: Lasbella, Balochistan. The company manufactures 4-stroke
Dhoom and Junoon models and 2-stroke YB100 model. Beside the company has
also introduced its first Euro II based motorcycle the new Mini-100.
Sohrab:
The company was established in 1952 in Lahore and pioneered in the
manufacturing of bicycles. Sohrab entered the motorcycle market in 1994 with its
JS70 model. Sohrab has also diversified its cosumer base and is currently
exporting to Bangladesh and Afghanistan. S100 and SD70 are some of the models
that the company manufactures.
Habib Motorcycles:
Habib Motorcycles (Pvt.)Ltd. Is the latest venture of the Habib Group of
Companies. The company has collaborated with leading international automobile
manufacturers and has introduced its HB70 motorcycle. The motorcycle has
managed to appeal the consumers and is doing very well in the market.
Ghani Automobile Industries:
The company was established in 2004. The company is a collaboration of Ghani
Group of Companies & Chongqing Yingang Science and Technology Group
Company Limited. The manufacturing facility of the company is located in
Lahore. Ghani Automobile Industries currently manufactures 70 cc & 100 cc
motorcycle, 100 cc 3-wheeler motorcycle rickshaw & 200 cc water-cooled CNG
Rickshaws. Some of their wellknown models include Ghani Gr-05 CC, Ghani Gi100 CC, Ghani Gi-150-9 etc.

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PORTERS FIVE FORCE ANALYSIS


Favorable

Moderate

Unfavorable

Threat Of New Entry


Economies of scale
Product
differentiation
Capital
Requirement
Switching Cost

Favorable
Moderate
Favorable
Favorable

Access to
distribution
channels
Government Policy

Unfavorable

Unfavorable

Bargaining power of Supplier


Differentiation of
inputs
Importance of
volume to supplier
Threat of forward
integration
Supplier
concentration
Presence of
substitute inputs

Moderate
Favorable
Favorable
Favorable
Moderate

Bargaining power of Customers


Buyer concentration
Buyer volume

Favorable
Moderate
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Buyer switching
costs
Buyer information

Favorable
Moderate

Impact of quality /
performance

Unfavorable

Rivalry among existing competitors


Industry growth

Favorable

Fixed costs

Unfavorable

Number of
competitors

Unfavorable

Threat of Substitutes
Switching cost

Favorable

Buyer propensity to
substitute

Favorable

Summary of Five Force Analysis


Five Forces

Result

Threat of New Entrants

Threat of new entrants is low

Bargaining Power of Buyers

Bargaining power of buyers is low

Threat of Substitutes

Threat of substitutes is moderate to low

Bargaining Power of Suppliers

Bargaining power of suppliers is high

Intensity of Rivalry Among Competitors

Intensity of rivalry is moderate

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MAJOR PROBLEMS FACED BY THE SECTOR


FAILURE TO INTRODUCE MODERN DESIGNS:
Pakistan is facing some serious competitions from India and China in the
international market. Pakistan has already lost Srilanka and Bangladesh and
its position in Afghanistan is also weakening. One of the reasons behind this
is the fact that local manufacturers have not been able to introduce new
designs and models as compared to India and China. Pakistan manufactures
70cc, 100cc and 125cc motorcycles with generic designs and product
differnetiation is very low. On the other hand India has managed to
introduce a large range of motorcycles with new designs and specifications
at prices as low as $320. Since Pakistan has given India the MFN status, the
Pakistani market will experience an influx of Indian manufactured
motorcycles and beside the government is also plannig to eliminate the
negative list of items by the end of this year

ACTIONS OF NON-PAMA OEMS:


Some of the actions of the orignal equipment manufacturers that are not
the members of PAMA are also negatively affecting the industry structure.
For instance they are indulging in sales tax evasion by not declaring actual
production figures and they are also found to be using imported parts
purchased from local importers and declaring them as parts produced by
the local manufacturers.

INCREASING PRICES OF RAW MATERIALS:


Prices of some the very basic raw materials used in the manufacturing of
motorcycles such as polycarbonate, alloy, metal etc have increased
drastically. Rubber per bundle used to cost PKR 1250 in 2007 whereas in
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2011 the prices per bundle increased to PKR 2500. The glass sheets used in
the manufacturing of head lightts, tail lights and indicators currenty costs
PKR 450 per bike. The pair of rear view mirrors used to costs PKR 750 back
in 2007 but in 2011 the prices have increased dramatically to PKR 1500.
Increase in manufacturing costs has also resulted in an increase in the price
of motorcycle. The price of Honda motorcycles has goneup from 58000 to
68500. The appreciating value of Yen against the Pakistani rupee is also
another factor that forces manufactures to increase prices.

SMUGGLING OF SPARE PARTS:


Mass scale smuggling of spare parts is not only affecting the genuine
importers but has also taken its toll on the overall industry. Smuggling of
auto parts from China through Sust Border and Afghan Transit Trade have
increased drastically and is causing millions of rupees losses to the
government and the national exchequer. The reasons behind this increased
smuggling are the high duties that the importers are required to pay.
Currently the importers of motorcycle auto parts are paying 80 to 85
percent taxes including 35 percent import duty, 17 percent additional duty
and 16 percent sales tax. The only sound way to control smuggling and
increase trade through legal channels is by lowering duties and taxes.

NO SINGLE MANUFACTURER OF ENGINES AND OTHER COMPONENTS:


Even though the motorcycle industry has achieved high levels of
localization i.e. over 90%, there is not a single facility that manufactures
complete engines. Major auto parts such as carburetor, Drive Chain, and
other engine components such as cylinder head, ring piston set, bearings,
bushes, timing chain, crankshaft etc are still imported from other countries.

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CONCLUSION & RECOMMENDATIONS


Overall the performance of the auto sector is satisfactory. The industry has got a
huge potential for growth as number of cars per person is increasing and the
industry has got excess capacity which will allow it to meet the increasing
demand for vehicles. One thing that is disappointing is the fact that the industry
has been operating for more than 30 years and has managed to achieve high
levels of localization i.e. 75% for cars and 95% for motorcycles yet the local
manufacturers have not been able to manufacture complete engines and other
major auto parts within the country and rely on imports. The government also
needs to devise a consistent policy for the auto sector. The government should
not abruptly end the protection given to the auto sector. One good decision
taken by the government this year was the ban on the imports of cars that are
used for more than 3 years. The government should also consider revising the
import duty structure as the government currently slashed down duty on CBUs
from 65% to 40%. With the import duties being so low, it will encourage
importers to import vehicles from other countries and their actions will cause
significant damage to the local industry.

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BIBLIOGRAPHY
http://www.wikipedia.org/
http://www.pama.org.pk/
http://www.competitiveness.org.pk
http://www.motorcycleexport.com/
http://www.cbr.gov.pk/

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