automotive sector report

AUTOMOTIVESECTOR REPORT

This document produced by the Punjab Board of Investment and Trade (PBIT) contains information from sources believed reliable; we do not guarantee that the matter is accurate or complete. Our Transactions Team compiled this document based onopinions and judgments, which may vary and be revised at any time without notice. This document is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell and is for information purposes only. It is published forthe use of our clients and may not be reproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication. The views expressed in this document are those ofTransactions Team at PBIT and do not necessarily reflect those of PBIT or its senior management.

P r o j e c t s & P o l i c y R e s e a r c h D e p a r t m e n t

Analysis by Projects & Policy Research Department | PBIT | Jan 2018

2

Contents Page Number

MANUFACTURING INDUSTRY AT A GLANCE

Economic Overview…………………………………………………………………………………………………………………….……. 4

Major Automakers…………………………………………………………………………………………………………….…………….…5

Auto Industry Contribution to Pakistan’s Economy …………………………………………………………………………….…….………6

Executive Summary……………………………………………………………………………………………………….……………….…..7

INDUSTRY ANALYSIS

Automotive Industry……………………………………………………………………………………………………………….……….….9

Two & Three Wheelers Industry……………………………………………………………………………………………….…………….11

CATEGORY WISE ANALYSIS

Cars ………………………………………………………………………………………………………………………….…………….…14

Buses and Trucks……………………………………………………………………………………………………………………..………15

Pickups and Jeeps………………………………………………………………………………………………………………………….…16

Tractors…………………………………………………………………………………………………………………………………….…17

Motor cycles & Three Wheelers………………………………………………………………………………………………………..…….18

COMPANY ANALYSIS

Automobiles………………………………………………………………………………………………………………………………..…20

Trucks & Buses……………………………………………………………………………………………………………………………….21

Top Selling Cars………………………………………………………………………………………………………………………………22

Net Sales & Profit………………………………………………………………………………………………………………………….....23

Net Gross & Operating Margin…………………………………………………………………………………………….…………………24

TRADE STATISTICS

Imports……………………………………………………………………………………………………………………………………..…26

Exports………………………………………………………………………………………………………………………………………..28

Automotive Parts Industry………………………………………………………………………………………………………....……30

Automotive Development Policy…………………………………………………………………………………………………..…….31

New Developments…………………………………………………………………………………………………………………...…..32

Opportunities……………………………………………………………………………………………………………………………..33

ANNEXTURE

Auto Mobile Sector Globally…………………………………………………………………………………………………………...........35

Global Auto Industry……………………………………………………………………………………………………………………..…..36

Global Production …………………………………………………………………………………………………….…………………...…37

Time line …………………………………………………………………………………………………………..………………………....38

ACRONYMS……………………………………………………………………………………………………………………...………41

2018 Punjab Board of Investment and Trade I Transaction Department. All rights reserved

3

MANUFACTURING INDUSTRY AT A GLANCE

Manufacturing sector is the backbone of Pakistan’s economy andconstitutes the second largest sector of economy contributing 13.5percent to Gross Domestic Product (GDP) It comprises mainly of LargeScale Manufacturing (LSM) with 80 percent share in Manufacturing and10.7 percent in GDP, whereas small scale manufacturing accounts for1.8 percent in total GDP and 13.7 percent share in manufacturing.

Growth in Sub sectors and sectors weights in LSM for theperiod of July-March FY 2016 versus July-March FY 2017 arebelow.

Manufacturing Sector

Large-scale Small-scale Slaughtering(80%) (13.7%) (6.7%)

10.7%1.8% 0.9%

Contribution to GDP

During FY 2017, Manufacturing sector recorded an impressivegrowth of 5.3 percent against 3.7 percent of last year whichhelped overall industrial sector to improve by 5.0 percent against5.8 percent last year. The Year on Year (YoY), LSM recordedsignificant growth of 10.5 percent in March 2017 compared to 7.6percent of March 2016.

2.6%

7.0%

2.1%

5.8%4.5%

2.0%

7.3%

2.4%

7.7%

1.8% 2.5%1.3%

2.5%

7.5% 7.2%

1.4%

9.2%10.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

LSM- YOY Growth

2015 2016

5% 5%

5%

21%

6%

58%

Sectors weights of LSM

Iron & Steel Products

Automobiles

Non-Metallic Mineral Products

Textile

Coke & Petroleum Products

Other

-7.48

23.51

10.28

0.662.4

16.58

11.31

7.11

0.78

-0.32

-10

-5

0

5

10

15

20

25

30

Iron & Steel Products Automobiles Non-Metallic MineralProducts

Textile Coke & PetroleumProducts

YoY- Growth in Sub sectors of LSM

9mFY16 9mFY17

ECONOMIC

OVERVIEW

4


Members of Pakistan Automotive Manufactures Association (PAMA)

HinoPak Motors Ltd.

Ghandhara industries

Ghandhara Nissan Ltd

Master Motor Corp. Ltd

Pak Suzuki Motors Ltd.

Indus Motor Co. Ltd

Honda Atlas Cars Ltd

Dewan Farooque Ltd

Sigma Motors Ltd

The biggest manufacturing associations in the sector are PAMA (PakistanAutomotive Manufacturers Association), PAAPAM (Pakistan Association ofAutomotive Parts and Accessories Manufacturers) and APMA (Association ofPakistan Motorcycle Assemblers). All of the associations provide basic anduseful information to their members. Furthermore, the EngineeringDevelopment Board (EDB) maintains data about the automotive industry.

Auto-Sector

• The automobile industry in Pakistan includes companies involved in theproduction/assembling of passenger cars, light commercial vehicles,trucks, buses, tractors and motorcycles.

• The current market structure of the industry is concentrated. It is largelydominated by Japanese players: Toyota, Suzuki and Honda. The threeplayers have deep rooted presence in Pakistan. FAW is a new addition tothe sector.

• The strength of truck & Bus segment is the availability of trainedmanpower for fabrication of bus bodies and chassis. There is unutilizedsurplus production capacity available for manufacture of buses for export.In the view of CPEC initiatives, it is expected that demand will increasemanifolds.

• The growth in sales of Trucks is due to the economic growth, increase ininfrastructural activities and boom in the housing industry.

5

MAJOR

AUTOMAKERS


Sector Investment of PKR 92B

Producing Annually over

1.6Mn motorcycles and 2 Lac Vehicles

50% to 70% vehiclesparts being locally

manufactured

Contribution to Govt. Revenue PKR 7-8 Bn annually

Contribution of Approx. 3% GDP & PKR 50 Bn to National Exchequer

Average capacity utilization of car industry 45%-55%

Employing 3.5 Million people

Auto Industry Sector Second largest tax

payer

6

AUTO

INDUSTRY

CONTRIBUTION


• In automobile sector, there has been a surge in productions of allits sub sectors. Remarkable growth has been witnessed in Farmtractors which is recorded at 54.5 percent, Trucks 36.1 percent,Jeeps more than 100% percent, two/three wheelers 19.8 percent,Buses 4.49 percent and Cars 3.8 percent during FY 2017 ascompared to corresponding period last year, whereas LCVsproduction declined by 32.29 percent.

• Automobile sector is among the top growth sectors in the largescale manufacturing in Pakistan. As stated earlier, the negativegrowth in case of Light Commercial Vehicles (LCVs)resulted fromthe discontinuation of Apna Rozgar Scheme but was compensatedby increased production of other models and growth in tractorsand trucks.

• The trucks production has risen due to economic activity in thecountry to meet CPEC related material and freight transportneeds. There is still enormous potential of growth in buses, givenan opportunity to local manufactures by the government informulating and implementing urban transport schemes

• The cars growth during the period was not up to the mark despiteimpressive sale of some new models. The factual position is thatused cars still hold about 20 percent of the market share. However,Honda atlas car decided to introduce new car BR-V to customersand assembled 2,157 units in 2017.

• The two/three-wheeler sector offers most preferredand economical means of transport and bestalternative in the absence of public transport andthus holds considerable opportunity of growth.

Cars LCVs Jeeps Buses TrucksFarm

Tractors

Installed Capacity 240,000 43,900 5,000 5,000 28,500 65,000

2015-16 179,944 35,836 582 1,070 5,666 34,914

2016-17 186,936 24,265 3,530 1,118 7,712 53,975

% Change 3.89% -32.29% 506.53% 4.49% 36.11% 54.59%

3.89%-32.29%

506.53%

4.49%36.11%

54.59%

-100.00%

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

0

50,000

100,000

150,000

200,000

250,000

300,000

Production of Automotive Industry

Installed Capacity 2015-16 2016-17 % Change

EXECUTIVE

SUMMARY

7


8

INDUSTRY ANALYSIS

63%67%

65%70% 67%

1%

2% 2%

2% 3%0%

0%0%

0% 0%1%

1%0% 0% 1%

8%

10%12%

14%

9%

27%

20% 21%

14%19%

189,628 173,052

235,319

258,203

277,536

-

50,000

100,000

150,000

200,000

250,000

300,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY13 FY14 FY15 FY16 FY17

Units

Automobile Industry of Pakistan

Cars Trucks Buses Jeeps Pick-Up's Tractors Total

• Automobile industry of Pakistanincreased at a compound growthrate of 10% over the period of 5years (2013-17) and produced277,537 units in FY 17 as compareto 189,628 units in FY 13.

• The total production of automobileis dominated by car productionswhich represents 67% in FY17followed by tractors 19%, Pickups &Jeeps 10%, Trucks and buses 3.2%.

• Cars, trucks and buses productionover the period has show anincreasing trend from (2013-17).

AUTOMOTIVE

INDUSTRY

9Source: PAMA


35,919.0

1,365.0 17.0

10,712.0

14,362.027,420.0

1,627.0495.0

7,647.0

6,992.0 2,046.0

48.0 2,757.0

19,061.0

- - - 108.0 -

-

- - - 336.0 -

13,969.0 - - - -11,571.0

-

173,052

235,319.0

258,203.0 277,536.0

0

50000

100000

150000

200000

250000

300000

FY14 Cars Trucks Buses Jeeps Pick-Up's Tractors FY15 Cars Trucks Buses Jeeps Pick-Up's Tractors FY16 Cars Trucks Buses Jeeps Pick-Up's Tractors FY17

Un

its

Automobiles- Change in Production- FY(14- 17)

Source: PAMA

• Cars, Trucks and Buses production over the period (FY14-FY17) has shown an increasing trend where as jeeps , pickupsand tractors production is volatile.

• In FY17 the car production has increase by 6992 units as compare to 359,191 units in FY14 mainly because of GOPRozgaar scheme in FY16. However, trucks production has shown an increasing trend and increase by 2046 units in FY17compare to 1,365 units in FY14.

Decreased in unit Produced during the

year

Increased in unit Produced during the

year

10

AUTOMOTIVE

INDUSTRY


735,065 722,230

1,311,699

1,559,488

36,442 42,965

50,397 73,477

-6% -1%

78%

20%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

FY14 FY15 FY16 FY17

Units

2 & 3 Wheelers change in Production (FY14-17)

Motorcycles Three-Wheelers % change

95% 95% 94% 96% 96%

5% 5% 6% 4% 4%

819,556 771,507

765,195

1,362,096

1,632,965

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY13 FY14 FY15 FY16 FY17

Units

2 & 3 Wheelers Industry of Pakistan

Motorcycles Three-Wheelers Total

• Two and Three wheelers industry of Pakistan increasedconsiderably by CAGR of 19% and produced 1,632,965units in FY17 as compare to 819,556 units in FY13.

• Motor cycle production dominates the industryproduction and represents more than 90% of the totalproduction over the period under review (FY 2013-17).

• Two and three wheeler industry flourished during the period FY16 and onwards and recorded 78% and 20% growth in FY 16 and FY17 respectively

• Moreover 589,469 and 247,789 more units of motorcycles were manufactured in FY16 and FY17 respectively . Similarly for three wheelers, production increase by 7,432 and 23,080 units in FY16 and FY17 respectively

11

TWO

&

THREE

WHEELERS

INDUSTRY


12

CATEGORY WISE ANALYSIS

20% 16% 14%20%

4%2% 2%

2%

24% 34%32%

28%

12% 9%9% 10%

2% 3%5%

9%

24% 20% 20%20%

12% 16% 17%10%

-3%

31%

18%

4%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY14 FY15 FY16 FY17

Total Cars Produced- YOY (FY14-17)

Honda Civic & City Suzuki Swift Toyota Corolla Suzuki Cultus

Suzuki WagonR Suzuki Mehran Suzuki Bolan % Change

• 116,605

• Total cars produced over the period FY14 -17 has increased at a growth rate of 17% and approached 186,936 units in FY17 as compare to 116,605 units in FY14.

• Out of total car production, in FY17 Toyota corolla represents 28%, followed by Suzuki Mehran and Honda Civic & City20% each and Suzuki Cultus and Bolan 10% each respectively.

• FY15 recorded the highest growth in car production and depict 31% growth and produce 35,919 more units of cars ascompare to previous year.

• 152,524 • 179,944 • 186,936

13

CARS


85% 84%79%

61%

3% 2% 3%

16%

11% 14% 19% 23%

7% 3%

86%

4%

558

575

1,070 1,118

-

200

400

600

800

1,000

1,200

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY14 FY15 FY16 FY17

Total Buses Produced- YOY (FY14-17)

Hino Nissan Master Isuzu % Change Total

40% 37%44% 39%

14% 21%14%

9%

24% 19% 16%

15%

22% 23% 26%37%

2,674

4,039

5,666

7,712

39%51%

40%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2,500

3,500

4,500

5,500

6,500

7,500

8,500

FY14 FY15 FY16 FY17

Total Trucks Produced- YOY (FY14-17)

Hino Nissan Master Isuzu Total % Change

• Total buses produced have increased to 1,118 units inFY17 and shown a growth of 4%, 86%, 3%, and 7%respectively as compare to previous years (FY 13-16).

• Over the period in FY 14-17 production of Isuzu busesincreased positively and represent 23% of total busesproduced in FY17.

• Production of Hino buses has increased in FY 16 by 356units and later reduced in FY 17 by 158 units.

• Moreover master buses have considerably increasedproduction in FY17 and produced 146 more units ascompare to previous year and represents 16% marketshare of buses.

• Truck production have increased positively through outperiod under review (FY14-17) and increase to 7,712 unitscompare to 5,666 units in FY16, 4039 units in FY15 and2,674 units produced in FY14 .

• Trucks production of Isuzu have increased at a fastergrowth rate as compare to Hino trucks and represents 37%market share in FY 17.

• Isuzu produced 1,397 more units in FY17 as compare to520 additional units produced by Hino relative to FY16production.

14

BUSES

&

TRUCKS


FY14 FY15 FY16 FY17

Total 420 685 582 3,530

Change in ToyotaFortuner

420 685 582 1,373

Change in HONDABR-V

- - - 2,157

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Total Jeeps Produces YOY (FY14-17)

100%

0% 39%

61%

Total Jeeps (FY14-17)

Toyota Fortuner HONDA BR-V

FY16

FY17

FY14 FY15 FY16 FY17

Total 16,768 28,183 35,836 24,265

Change in SuzukiRavi

1,492 11,072 6,424 (11,229)

Change in ToyotaHilux

792 343 1,229 (342)

(20,000)

(10,000)

-

10,000

20,000

30,000

40,000

Total Pickup's Produces YOY (FY14-17)

83%

17%

83%

17%

77%

23%

Total Pickup's (FY15-17)

Suzuki Ravi Toyota Hilux

FY15

FY17

• Production of Jeeps have increasedconsiderably in FY 17 as production ofHonda BR-V produced 2157 units as itwas launched in 2017. MoreoverToyota Fortuner also produced 791more units in FY 17.

• Market share of Honda in BR-V in jeepcategory is 61% in FY17.

• Production of Suzuki Ravi increasedthe most in FY 15 by 11,072 unitsfollowed by 6,424 in FY16, However inFY 17 the production of Suzuki Ravidecline by more than 11 thousandunits due to closure of green cabsscheme by GOP.

• Toyota Hilux has shown an increaseproduction in FY 16 followed by adecline of 342 units.

• Suzuki ravi represents the majorityshares in pickup category and depict77% in FY 17.

15

PICKUPS

&

JEEPS FY16


34%64%

2%

37%

60%

3%

36%

63%

1%

Total Tractors (FY15-17)

Al-Ghazi

MillatFY15

4,727.09,526.0

109.0

6,808.0

13,002.0

(3,872.0)

(10,047.0) (50.0)

(749.0)

34,521.0

48,883.0

34,914.0

53,975.0

0

10000

20000

30000

40000

50000

60000

FY14 Al-Ghazi Millat Orient IMTTractor



FY17

Tractors- Unit Production Bridge

Source: PAMA

• Production of tractors increased in FY 15 and FY17 where 53,975 units wereproduced in FY17.

• Al ghazi and Millat both shown an upsurge in production in FY17 andincreased production by 6,808 and 13,002 units respectively as compare toprevious year.

• Over the period under review Millat tractors dominate the market andrepresents 63% market share in FY17 followed by al ghazi (34%) and orient(1%).

16

TRACTORS

FY17


FY14 FY15 FY16 FY17

Total 735,065 722,230 1,311,699 1,559,488

Chang in Honda 2,646 13,527 157,946 150,101

Change in Road Prince - - 167,241 40,003

Change in United - - 262,773 63,958

Change in Others (49,327) (26,362) 1,509 (6,273)

(200,000)

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Motorcycles Production (FY14-17)

62%13%

20%

5%

62%13%

21%

4%

Total Motercycles (FY14-17)

Honda Road Prince United Others

FY14 FY15 FY16 FY17

Total 36,442 42,965 50,397 73,477

Change in Qingqi (2,657) 7,124 (984) 2,399

Change in Sohrab (1,881) (900) 1,484 5,116

Change in United - - 1,576 4,503

Change in Road Prince - - 1,059 7,879

Change inn Sazgar 3,170 299 4,297 3,183

(10,000)

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

3 Wheelers Production (FY14-17

68%32% 0%0%

0% 56%

36%

2%

3%3%

42%

29%

12%

9%

8%

Total 3- wheelers (FY14-17)

Qingqi Sazgar Road Prince Sohrab United

• Motor cycle production in Pakistan havebeen increased significantly at acompound growth rate of 28% from(FY14-17).

• Three major players dominate themotorcycle industry and capture morethan 90% of market share (Honda 62%,Road prince 21%, United 13%) In FY 17.

• In FY17 150,101 more units of Hondawere produced followed by United(63,958) and Road Prince (40,003) .

• Three wheeler industry of Pakistan hasalso shown considerable growth of 18%over the review period FY14-17

• Sazghaar and qingqi were the 2 playersdominating the market till 2015, whichlater changed after the entrance of newplayers in 3 wheelers (United, Roadprince).

• In FY17, the industry shown anexceptional growth of 25%, where eachplayer shown considerable increase inunits produced .

17

MOTORCYCLES

&

3

WHEELERS


18

COMPANY ANALYSIS

FY15 FY16 FY17

Inc. in Honda Atlas Cars Ltd. 666 790 13,627

Inc. in Indus Motors Co. Ltd. 23,876 7,208 (4,151)

Inc. in Pak Suzuki Motor Co. Ltd. 23,267 26,972 (11,107)

% change in auto production 36% 19% -1%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

(15,000)

(10,000)

(5,000)

-

5,000

10,000

15,000

20,000

25,000

30,000

AutoMobile Companies (FY15-17)

18% 13% 12% 18%

25% 31% 30%28%

58% 55% 59% 54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY14 FY15 FY16 FY17

Automobiles

Honda Atlas Cars Ltd. Indus Motors Co. Ltd. Pak Suzuki Motor Co. Ltd.

• Pak Suzuki motors represents 54%of market share of all automobilesmanufacturing including cars, jeepsand pickups in FY17.

• Honda market share increase inFY15 and FY16, however there is andecrease in market share in currentyear.

• Overall market of car, jeeps andpickup has shown an increase of36% and 19 % in FY15 and FY16.

• Later In FY17 there was negativegrowth of 1% observed due to4,600, 10,557 and 11,229 less unitsproduced by Toyota Corolla, SuzukiBolan and Suzuki Ravi respectively.

• However, Suzuki WR, Cultus,Toyota Fortuner, and Honda BR-Vhas shown a positive growth.

19

COMPANY

ANALYSIS

AUTOMOBILE


47% 42%49%

42%

20%22%

25% 35%

12% 19%12% 8%

20% 17% 14% 15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY14 FY15 FY16 FY17

Trucks & Buses

Hinopak Motors Ltd. Ghandhara Industries Ltd.

Ghandhara Nissan Ltd Master Motor Corporation Ltd.

• Hino Pak and Ghandhara industries arethe major producers of trucks andbuses.

• Ghandhara industry has shown morepositive growth in production ascompare to Hino Pak in FY17 andrepresents improved 35% market shareas compare to 25% in previous years.

• Overall production of trucks and busesincreases by 31% in FY17 Mainly dueto 1,457 increased unit of trucks andbuses produced by ghandharaindustries.

• Similarly in FY16 ,the growth (46%) inproduction is dominated by 1348 unitsof increased buses and trucksproduced by Hino Pak Motors.

FY15 FY16 FY17

Inc. in Hinopak Motors Ltd. 425 1,348 362

Inc. in Ghandhara Industries Ltd. 344 661 1,457

Inc. in Ghandhara Nissan Ltd 473 (53) (82)

Inc. in Master Motor Corporation

Ltd.140 166 357

% change in Trucks & Buses

production43% 46% 31%

0%5%10%15%20%25%30%35%40%45%50%

(200) -

200 400 600 800

1,000 1,200 1,400 1,600

Trucks & Buses Companies (FY15-17)

20

COMPANY

ANALYSIS

TRUCKS


TOP

SELLING

CARS

21

FY14 FY15 FY16 FY17

Honda Civic & City 29,087 51,398 57,452 52,676

HONDA BR-V 29,509 29,886 37,504 37,933

Toyota Corolla 23,674 23,622 25,726 37,004

Suzuki Mehran 14,088 23,582 30,154 19,245

Suzuki Bolan 12,419 22,815 29,825 17,944

Suzuki Ravi 1,621 5,246 9,709 17,671

Suzuki WagonR 14,682 13,837 16,450 17,006

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Top Selling Cars- (FY14-17)

Honda Civic & City HONDA BR-V Toyota Corolla

Suzuki Mehran Suzuki Bolan Suzuki Ravi

Suzuki WagonR

FY15 FY16 FY17

Honda Civic & City 22,311 6,054 (4,776)

HONDA BR-V 377 7,618 429

Toyota Corolla (52) 2,104 11,278

Suzuki Mehran 9,494 6,572 (10,909)

Suzuki Bolan 10,396 7,010 (11,881)

Suzuki Ravi 3,625 4,463 7,962

Suzuki WagonR (845) 2,613 556

Total 45,306 36,434 (7,341)

(20,000)

(10,000)

-

10,000

20,000

30,000

40,000

50,000

Growth in Units Sold- Top Selling Cars (FY14-16)

Honda Civic & City HONDA BR-V Toyota Corolla Suzuki Mehran

Suzuki Bolan Suzuki Ravi Suzuki WagonR Total

• Honda gaining momentum with the launch of new Civicmodel and introduction of new crossover SUV – BRVwhich makes it the top selling car in recent year.

• Suzuki maintains its position through marketpenetration and diversity of models through out thereview period.

• Strong demand for Toyota corolla makes it into top 3 ofthe best selling car in FY17.

• Undoubtedly Toyota corolla has been the best selling car inPakistan in FY17 with increase of 11,278 units sold ascompare to previous year.

• Suzuki is consistent in selling units of Mehran and bolanRavi with the exception in FY17 when their sales goesdown after the complication of Rozgar scheme.

• Suzuki wagon R and Ravi is also top selling brands in recentyears.


16,590

8,781

39,153

57,064

53,665

44,479

22,938

9,636

37,764

96,516

84,549

45,772

16,914 12,099

40,086

108,759

76,516

55,022

-

20,000

40,000

60,000

80,000

100,000

120,000

Millat Tractors Limited AL-Ghazi Tractors Limited Honda Atlas Cars Toyota Pak Suzuki Atlas Honda

PK

Rm

Net Sales

FY14 FY15 FY16

1,482

1,575

1,074

3,873

1,922 2,002

2,382

1,592

3,162

9,110

5,843

2,351

1,750

1,927

3,556

11,455

2,773

3,002

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Millat Tractors Limited AL-Ghazi Tractors Limited Honda Atlas Cars Toyota Pak Suzuki Atlas Honda

PK

Rm

Profit after tax

FY14 FY15 FY16

NET

SALES

&

PROFIT

22


9%

18%

3%

7%

4%5%

10%

17%

8%9%

7%5%

10%

16%

9%11%

4%

5%

0%

5%

10%

15%

20%

Millat TractorsLimited

AL-Ghazi TractorsLimited

Honda Atlas Cars Toyota Pak Suzuki Atlas Honda

Net Profit Margin

FY14 FY15 FY16

18%

26%

7%10%

8%9%

19%

26%

13%15% 14%

10%

20%

28%

15%16%

10% 10%

0%

5%

10%

15%

20%

25%

30%




Gross Profit Margin

FY14 FY15 FY16

14%

26%

5%9%

5% 6%

16%

25%

10%

15%

10%7%

16%

24%

13%16%

6%7%

0%

5%

10%

15%

20%

25%

30%




Operating Profit Margin

FY14 FY15 FY16

23

• Gross Profit Margin is a measure of theproportion of revenue that is left afterdeducting all costs directly related to the sales.

• Operating profit margin is a measure of theproportion of revenue that is left afterdeducting all operating expenses. This revealsthe operating efficiency of the business.

• Net profit margin is a measure of theproportion of revenue that is left after allexpenses have been paid.

NET

GROSS

&

OPERATING

MARGIN


24

TRADE STATISTICS

45.20%

21%

16.50%

6.60%

2%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

Japan Thailand China Indonesia Belarus

Share in value (USD 000) vehicles and parts (HS 87) in Pakistan's imports, % in 2017

Japan Thailand China Indonesia Belarus

• Pakistan imports vehicles and partsmainly from japan followed byThailand , Japan, China and Indonesia

IMPORTS

25

1,205,545

558,555

440,475

52,217

175,256


IMPORTS

26

2015 2016 2017

SPARE PARTSVALUE

252,582 292,176 388,627

VEHICLES VALUE 600,564 800,306 882,395

Change in imports 28% 16%

252,582 292,176 388,627

600,564

800,306 882,395 28%

16%

0%

5%

10%

15%

20%

25%

30%

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

1,000,000

Value in USD 000

SPARE PARTS VALUE VEHICLES VALUE

Change in imports

8708 Parts and accessories for tractors, motorvehicles

8714 Parts and accessories for motorcycles andbicycles

Thailand 104,053 2,038

Japan 50,102 10,344

Indonesia 50,034 1115

China 46,197 66,466

104,053

2,038

50,102

10,344

50,034

1115

46,197 66,466

- 20,000 40,000 60,000 80,000

100,000 120,000

Import of parts Value in USD 000

Thailand Japan Indonesia China

388,627 , 31%

882,395 , 69%

2017 Import Value in USD 000

SPARE PARTS VALUE VEHICLES VALUE

92,565 51,348 38,159

6,406 955

73,024 17,631 14,012 3,123 1,047

800,124

353,632

119,328

40,741 20,658 10,178

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Japan Belarus China Korea,Republic

of

France China Thailand Japan Viet Nam UnitedStates ofAmerica

Japan Thailand Indonesia Germany China Hungary

8701Tractors 8711 Motorcycles 8703 Motor Cars

import value in USD 000

• Pakistan import of vehicles and spare parts has shown an increasing trend, an increase by 16% in 2017 as compared to previous year.• Pakistan import only 2 categories of spare parts 8708, 8714 whose more than 80% of total imports are dominated by 4 countries.

(Thailand, Japan, Indonesia and China)• Moreover three categories (8701, 8003, 8711) represent more than 75% import value of vehicles built in units.


14.10%

7.80% 7.80% 6.80% 6.70% 6.40% 5.40%

45%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

Share in value( In USD 000) in Pakistan's exports, % in 2017

Afghanistan Nigeria Botswana

United Arab Emirates Italy United States of America

United Kingdom other

• Afghanistan, Nigeria, Botswana ,UAE and Italy are the top countries which imports vehicles and parts (Hs 87) from Pakistan.

EXPORTS

27

5,971.0

3,310.0 3,279.0 2,885.0 2,822.0 2,712.0 2,230.0


EXPORTS

28

2017 2016 2015

SPARE PARTS VALUE 15,892 15,872 17,544

VEHICLES BUILT IN 26,378 23,131 28,507

CHANGE 8% -15%

15,892 15,872 17,544

26,378

23,131

28,507 8%

-15%

-20%

-15%

-10%

-5%

0%

5%

10%

-

5,000

10,000

15,000

20,000

25,000

30,000

Value in USD 000

SPARE PARTS VALUE VEHICLES BUILT IN CHANGE

15,892 , 38%

26,378 , 62%

2017 export value in USD 000

SPARE PARTS VALUE VEHICLES BUILT IN

2821

2

2579

126

1774

0

1137

1

990

95

753

510 510

250500750

100012501500175020002250250027503000

8708 parts of tractors 8714 parts for motor cycles

Exports of value in USD 000

Italy United States of America United Kingdom

Spain Bangladesh United Arab Emirates

Afghanistan

Botswana NigeriaTanzania,

UnitedRepublic of

AfghanistanUnited

KingdomAfghanistan Japan Iraq Bangladesh AfghanistanBangladesh

Mozambique

Malawi

8701 tractors 8703 motors 8711 Motor Cycles

Series1 3,265 3,004 2,101 1,699 411 363 188 165 62 3,718 814 56 20

3,265

3,004

2,101

1,699

411 363 188 165

62

3,718

814

56 20

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Export Value in USD 000


AUTOMOTIVE

PARTS

INDUSTRY

29

Overview

• Around 1,700 automotive parts manufacturers are present in the Automotive Industry of Pakistan. The parts manufacturers are mainlylocal capital companies whereas the OEM assemblers are led by Japanese companies

• A large number of these are involved in the production of repair parts. 200-240 companies supply parts for OEM (original equipmentmanufacturer) production.

• In Pakistan, most of these are directly supplied to automakers, hence these are considered to be first tier suppliers and it can be concludedthat the auto parts industry does not consist of clear multiple tiers, which may be seen in other various countries.

• After privatization the auto motive parts industry expanded strongly later, with its growth accelerating in the 1990s, when localization ofautomotive parts became pervasive.

Technical support to auto parts manufacturing industry

• In order to broaden the scope of productivity and improvement activities across the value chain of auto sector and subsequently improvingthe share of localization of auto parts, SMEDA in collaboration with JICA has initiated a technical support program of Japanese forimproving the productivity and quality.

• The program was launched in collaboration with JICA in FY 2014-15. During this 4 years program, technical support will be extended to 50auto parts manufacturing units of Pakistan through five (05) JICA technical experts.

• During Jul-March 2016-17, technical support to 29 auto parts manufacturing units has been provided under the project.


The Government of Pakistan has announced Automotive Development Policy (ADP) 2016-21 in March2016.Highlighting the main features: From the financial year 2017-18, duties on locally finished vehicles would be reduced by 10% Duties for imported parts, not made in Pakistan reduced from 32.5% to 30% and made in Pakistan

cut from 50% to 45% from next financial year (July 1, 2016). Tax incentive for new investments in Pakistan defined under two categories :Category A - Greenfield Investment-(i) One-off duty-free import of plant and machinery for setting upan assembly and manufacturing facility has been allowed.(ii) The government has allowed the import of 100 vehicles of the same variants in the form ofcompletely built units (CBUs) at 50% of the prevailing duty for test marketing after the ground-breaking of the project.(iii). Concessional rate of custom duty @ 10 % on non- localized parts and @ 25% on localized parts fora period of five years for the manufacturing of Cars and LCVs For existing players, the duty on importof localized parts has been reduced to 45% from the current fiscal year.Category B - Brownfield Investment-(i) Imports of non-localized parts at 10 % rate of customs duty andlocalized parts at 25% duty for a period of three years for the manufacturing of Cars In the current policy, the existing three car makers will not be entitled to the benefits that are

being offered to the new investors provided the policy was aimed at enhancing consumer welfareand boosting competition in the country besides attracting new automotive players.

The greater localization of the auto parts had been ensured in the new policy and if the newentrants fail to do achieving targets, they would be penalized.

AUTOMOTIVE

DEVELOPMENT

POLICY

ADP.2016

-2021

30


NEW

DEVELOPMENTs

MILLAT TRACTORS The success of Millat is to convert their vintage engine into Euro II and would

facilitate the export of tractors immensely

HINO PAK MOTORS

UNITED MOTORS LTD

Hyundai Nishaat Motors

Kia Motors

Renault & Al-Futtaim

HINO has exported a few buses to UAE and Saudi Arabia. There is also a huge freight advantage for export to Afghanistan, Middle East and Africa from

Pakistan as compared to competitors in East Asia

Number one bike assembler of Chinese bikes, has entered into local assembly of vehicles. The plant of United in Lahore will be ready to produce Mehran and

Ravi lookalikes in first half of 2018

It signed an investment agreement. To set up a Greenfield project to undertake assembly and sale of passenger and one-tone commercial vehicles . Expected

initial Productions of 7,000 vehicles in 2020.

It will start assembling cars in a joint venture with Lucky Cement and are in process of establishing the assembly plant.

Renault and Al-Futtaim have signed definitive agreements to assemble vehicles in a new plant in Faisalabad. The plant will be built starting the first quarter of

2018. Car sales will begin in 2019 and be ramped up in 2020.

31


OPPURTUNITIES

VOLVOThe success of Millat is to convert their vintage engine into Euro II and would

facilitate the export of tractors immensely

OPPURTUNITIES

Increasing buying capacity, rapid urbanization and a growing economy offers an enormous opportunity to carmakers

• Car penetration as low as 13 vehicles per 1,000 persons, offers a huge potential for growth to global carmakers.

• Low interest rate and Bank’s car financing has left the automobile industry booming.

• Government discourages the unnecessary imports of used cars to curtail the growing trade deficit by imposing new import

policy SRO rules.

• The tariff incentives offered to the new comers are unprecedented which indeed is aimed to develop the industry• Low entry threshold along with fast growing auto sector and growing economy of Pakistan encourage new players.

SCANIAIt is interested in entering the Pakistani market. Yousaf Dewan Companies have struck a deal with European truck manufacturer for exclusive distribution rights

32

LIFAN & BAWBAW has signed a vehicle assembly joint venture agreement with Cavalier Autos to bring its light commercial vehicles, double cabin pickups and SUVs to Pakistan.


33

ANNEXTURE

34

AUTO

MOBILE

SECTOR

GLOBALLY


The global auto industry comprises of numerousmushroom car manufacturers but the giants of thisindustry are 21 players. Top 5 companies by Marketsize have a 50% market capitalization of the totalmarket. Currently the market has 5 top players includes2 Japanese and 3 German car manufacturers. Themarket value of these companies are $ 1051B.

Japanese car manufacturer, Toyota held thehighest market capitalization of $ 191.25B.Second, third and Fourth spot held by German carmanufacturers Volkswagen ($ 108.9B) andDaimler ($ 86.43B) and BMW group($ 74.64B) andthe 5th player is Honda ($ 64.6B) respectively in FY18.In Terms of $ value Tesla has the highest value pershare of $ 294. Second highest valued share is ofVolkswagen at $ 216.27.

35

GLOBAL

AUTO

INDUSTRY


36

GLOBAL

PRODUCTION

CHINA JAPAN GERMANY USA SOUTH KOREA

2014 19.9 8.28 5.6 4.25 4.12

2015 21.1 7.83 5.71 4.16 4.13

2016 24.42 7.87 5.75 3.93 3.86

19.9

8.28

5.64.25 4.12

21.1

7.83

5.714.16 4.13

24.42

7.87

5.753.93 3.86

0

5

10

15

20

25

30

Mill

ion

Un

its

Countries

Global Productions

2014 2015 2016

• China, Japan, Germany, US and South Korea are the TOP five car producers during last 3 years.

• During past 3 to 4 years, global passenger car production demonstrated strong growth.

• The leading car manufacturers worldwide include US-based General Motors and Ford, Germany’s Volkswagen Group,as well as the Japanese automakers Toyota Motor Corporation and Nissan.


1949-1953

1956-1960

1961-1964

1965-1970

TimelineAuto Industry In Pakistan

• Vauxhall Cars introducedby General Motors &Sales. Bedford Trucksintroduced by GeneralMotors & Sales. FordTrucks introduced by AliAutomobiles

• Exide battery startedproduction

• Dodge Cars introduced byHaroon Industries

• Ford Angela Cars introducedby Ali Automobiles

• Ford Pickups introduced byAli Automobiles

• Ford Combi introduced by AliAutomobiles

• Precision auto parts manufacturingstarted at Allwin Engineering

• Lamberate Scooter introduced byWazir Ali Engineering. Jeep CJ 5, 6,& 7 introduced by KandawalaIndustries. Bedford Truckassembling started at GhandaraMotors.

• Mack Trucks introduced by HyeSons. General Tyres & RubberCompany started production inKarachi

• Specialized VehiclesProduction at JafferIndustries.

• Toyota vehiclesintroduced byMonnoo Motors

37


1976-19801981-1985

1986-1990

• Suzuki Motor Cycle introducedby Sindh Engineering.

• Kawasaki Motor Cycleintroduced by Saif NadeemKawasaki. Suzuki Jeepintroduced by Naya DaurMotors.

• Plastic parts manufacturing atSPEL.

• Suzuki Pickups introduced byAwami Autos, Mazda Truckintroduced by SindhEngineering, Project approvedfor production of wheel Rimsat Balochistan Wheels underTAA with GKNSankey.

• Wire Harness production atAyenbee, Production of SpecializedAuto Parts at Agri auto Industries.

• Suzuki Cars production started byPak Suzuki. Bolan Castings startedproduction, Belarus Tractorsintroduced by Fecto Tractors.

• Fiat Tractors introduced by Al-GhaziTractors, Vendor Development &Technical Cell (VDTC) formed

• Hinopak Motors Limitedformed as joint venturecompany between PACO, Al-Futtaim, Hino Motors & TTC.

• Production of Nissan DieselTrucks by Ghandara Nissan.

• Pakistan Association of AutoParts and AccessoriesManufacturers (PAAPAM)formed.

• Second car plant sanctionedby the GoP (Indus MotorCompany).

1971-1975

• Nationalization, PakistanAutomobile Corporation (PACO)formed. Ali Autos renamedAwami Autos, Wazir AliEngineering renamed SindhEngineering, Haroon IndustriesRenamed Republic Motors,Ghandara Motors renamedNational Motors, KandawalaIndustries renamed NayaDaurMotors, Hye Sons renamedMack Trucks, Jaffer Industriesrenamed Trailer DevelopmentCorporation, Rana Tractorsrenamed Millat Tractors, TractorCorporation of Pakistan formed.

• Yamaha Motor Cycle launchedby Dawood Yamaha, DieselEngines manufacturing startedat Bela Engineering

38


1996-2000

1991-1995

• Privatization of Pak Suzuki Motor Co.• Production of Toyota Corolla by Indus Motor Company

Limited First export of Buses and Trailers by HinopakMotors Limited.

• 1994 Production of Honda Civic by Honda Atlas Cars PakLtd. Import of Vehicles under Yellow Cab Scheme.Pakistan Automotive Manufacturers Association (PAMA)formed.

• Engineering Development Board (EDB) formed First PAPShow in Islamabad.

• First Industry Specific Deletion Programme (ISSDP) printedfor the period up to 2001.

• VDTC renamed AT & TC. Second PAP Show held in Lahore.Aircon Systems production starts at San pak Lahore.Production of Sohrab Motorcycle.

• Export of Light Commercial Vehicles by Pak Suzuki MotorCompany. Saigol Quingqi starts production of motorcycleswith Chinese collaboration.

• Dewan Farooque Motors starts production of KoreanPickup named Shahzore. Hinopak Motors Ltd. taken over byHino Motors and TTC of Japan.

39


ACRONYMS

40

GDP : Gross Domestic Product

YOY: Year On Year

LSM: Large Scale Manufacturing

PAMA : Pakistan Automotive Manufactures Association

PAAPAM: Pakistan Association Of Automotive Parts And Accessories Manufacturers

APMA: Association Of Pakistan Motor Cycle Assemblers

EDB: Engineering Development Board

CPEC: China Pakistan Economic Corridor

LCV: Light Commercial Vehicles

CAGR: Compound Annual Growth Rate

FY: Financial Year


41

References

• PAMA statistical data• SBP Economic Data • PACRA in-house database • Pakistan Economists New Duty Policy• Pakistan New development Policy• PACRA Vehicles Report 2017-18• PACRA Trucks Report 2017-18• Association of Pakistan Motorcycle Assemblers


Punjab board of investment & trade is a provincial trade and investment promotion agency

established by the Government of Punjab in 2009. In today′s global economy, trade and investment

play an increasingly important role in generating means for transformative change. At PBIT, we

strive to ensure that this transformative change is sustainable and more impactful. PBIT is

committed to enhancing the global competitiveness of Punjab and its business. To this end, we

work to attract new investments in the region and strengthen the existing ones by promoting local

investment opportunities, facilitating businesses and highlighting the distinct advantages of Punjab

as a business location.

Incorporated under Section 42 under the Companies Ordinance of 1984, Punjab Board of

Investments & Trade (PBIT) assists companies which intend to invest in the manufacturing and

services sectors of Punjab. The wide range of services provided by PBIT include providing

information on the opportunities for investments, as well as facilitating companies which are looking

for joint venture partners. PBIT acts as Punjab's marketing arm and actively promotes the province

worldwide as one of the best investment hubs in Asia. PBIT as Special Economic Zone Authority

Punjab also evaluates the applications/proposals from Developers to declare their Industrial Parks

as Special Economic Zones. For granting one time import duty exemption on machinery, equipment,

spare parts, consumables in Special Economic Zones, PBIT is responsible to issue a confirmation

Letter on the status of the applicant prior to seeking the permission from the relevant

department/agencies to claim for the exemption. Investors are always encouraged to discuss their

project interests with PBIT officers, wherein Information can be obtained on major public/private

projects, prevailing sectoral policy framework, existing incentive regime, financing options, trade

statistics etc. Punjab Board of Investment & Trade is a Steering Committee Member and the

Director of South Asia at the World Association of Investment Promotion Agencies (WAIPA) - a

prestigious world association of organizations similar to PBIT created by UNCTAD.

ABOUT US

Punjab Board of Investment & Trade

23 – Aikman Road, GOR 1, Lahore. Pakistan

PABX: +92 (042) 9920 5201-06

Fax: +92 (0) 42 9920 5171

Web: https://www.pbit.gop.pk

Punjab Board of Investment and Trade targets a

socio-economic growth through its P&PR. The

department plans to fortify its deep roots, both

locally and internationally, by

reaching out to leading businesses for

discussing the panoramic commercial

opportunities. As per the initiative ofinventiveness, the department plans to provide a

transaction advisory as defined in its role to

bring-in the investments and establish new

businesses. For this purpose, Pitch books of

different identified sectors are a new

resourcefulness of this department which would

target to develop the in-house capacity of

production by connecting the local andinternational market players. This would not only

ensure the technology transfer but also create

several jobs in the province. The department

plans to connect through the regional IPAs,

financial institutions, the embassies in different

countries and local chambers as well so as to

fast-track the process of economic growth and

industrialization in Punjab in regard to its

recognition as ‘The Land of Opportunities

Projects

and

Policy

Research

Department

automotive sector report

Documents