Back in February 2017, Pakistan’s one of the biggest conglomerates, Nishat Group, announced that it will be entering country’s accelerating automotive industry via a joint venture with South Korean auto manufacturer Hyundai Motor Company for the production of Hybrid cars. As obvious by now, this move and other such developments occurred in the backdrop of new Automotive Policy 2016-21, which has not only offered lucrative incentives for the greenfield projects but has played a role in accelerating the overall market growth. Sensing the rapidly changing times, the (already established) local auto manufacturers announced new investment plans as well as took the initiative to revamp their product lineup. A fact which is only augmented by the launch of six cars in six months.
Surprisingly, while researching this topic I stumbled across a peculiar statement by one of the company’s top confidante, in an interview, Norez Abdullah CFO of Hyundai Nishat Motor Limited revealed that the company had attempted to enter the automotive market frey back in 2012, but the policy wasn’t very favorable at that time. As highlighted in a previous post, the group intends to introduce hybrid cars in Pakistan, but considering the cost of installing such infrastructure is costly, thus in the current situation, both partners (Nishat Group and Hyundai Motor) have yet to reach an accord on how to proceed further. Market analysts predict that Hyundai Nishat Motor Limited will be:
- Conducting feasibility on which car(s) to be launched in country
- Start company operations by introducing (select) imported vehicles and gauge public’s response on them.
- Bring hybrid technology in Pakistan and build after-sales service and localization network.
It is prudent to mention that Nishat Group will be pouring an investment of around $120 million into setting up an assembly plant near Faisalabad. Nonetheless, as mentioned earlier, the vehicle has yet to be selected. There are two likely scenarios as highlighted by Norez Abdullah in his interview:
- The launch of an 800cc car (or)
- The launch of a 1000cc car
Abdullah remarked that the company is already conducting several surveys to decide which car to launch, but the economics of both these segments vary drastically from each other. Where the 800cc segment will appeal more to emerging middle-class and produce minimal profit margins for the company; the 1000cc category is likely to be the polar opposite, he said.
Additionally, reports are suggesting that company is looking forward to introducing two vehicles, low-end model and a high-end model, presumably Hyundai Ioniq and a sports utility vehicle.
Naturally, Hyundai’s inevitable return to Pakistan will complement the government’s efforts to bring in new investors amidst increasing demand for automobiles in the country. The company in question, Hyundai Motor Company along with Kia Motor used to assemble cars in Pakistan until 2004 but withdrew after their local partner Dewan Farooque Motors Limited went bust. However, industry experts are predicting a positive future for the re-entry of Hyundai in Pakistan, partly because the local partner (Nishat Group) is a very diversified group in banking and insurance, which has a lot in common with the auto-industry and partly because the demand for vehicles is outstripping the production. All three local manufacturers are expected to face capacity constraints in the upcoming months because:
- Orange Taxi scheme has seen great traction.
- Both Honda Atlas and Toyota IMC will be exceeding their production capacity to cater the increasing demand.
The problem, dear readers, is not just limited to production capacity; delayed investments, long booking time and the ever increasing premium rates have already made a huge gap in the local automotive market, which is currently being fulfilled by imported JDM cars. The entry of a new automanufacturer in this situation will be a huge relief for the local buyer.
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