Introduction

The dictionary says that an automobile is a land vehicle equipped to carry a

driver and several passengers, generally moving on four wheels and
propelled by an engine that burns gasoline, and the companies that
manufacture these automobiles are categorized under the automobile
industry. So simple it seems.
However, in the real substance, automobiles and the auto sector mean much
more than this. It represents mobility, transportation and communication. It
represents an industry that has a strong impact on a dozen other sectors
may it be steel, vending, petrol or even employment. Hence auto sales
reflect not only the basic human desire for mobility but these are also an
important economic indicator.
The auto sector, like other industries of Pakistan, has its share of problems
and issues. This part of the report firstly covers the analysis of the whole
industry discussing the various mega environmental factors as well as other
relevant issues. Then it will move on to discuss the theoretical companies
analysis. The whole analysis, industry wise as well as company wise, would
form the basis of the financial analysis that comprises of the second part of
my report.
The companies I have chosen are Toyota, Honda and Pak Suzuki Motors
Company.
The objective of this study, besides to get a good grade in the subject, is to
understand the basics of the automobile industry of Pakistan, discuss its pros
and cons, find the reasons for its present state, present the future outlook
and propose some ideas that might lead to better results.

WHAT IS THE AUTOMOBILE INDUSTRY?

The automobile industry in Pakistan includes companies involved the

production/assembling of passenger cars, light commercial vehicles, trucks,
buses, tractors and motorcycles. The auto spare parts industry is an allied of
the auto industry. The auto & allied industry form a major sector in Pakistan.

MARKET STRUCTURE
The market structure of the automobile industry in Pakistan is concentrated.
In economics term, we could say its an oligopoly, which is characterized by
imperfect competition in which the industry is dominated by a small number
of suppliers. This is because the auto industry is highly capital-intensive
requiring high investments and the products are expensive. Hence the
barriers to entry are high resulting in the presence of limited number of
suppliers.
Moreover, the market can also be categorized as price-oriented. As cars are
luxury items, especially in developing countries (Pakistan being one of
them), the demand for them is elastic. Any prices change affects the sales of
the company to a great extent.

MAJOR PLAYERS IN THE MARKET

There are 12 automobile companies listed on the Karachi Stock Exchange
under the sector of Auto & Allied. The car industry in Pakistan primarily
comprises of four players, all of which are Japanese. These are Pak Suzuki
Motor Company Ltd., Indus Motor Company Ltd., and Honda Atlas Cars Ltd.
And Ghandhara Nissan Ltd. Amongst these, the first players comprises the
major position in the market. Naya daur Motors are the manufacturers of Kia.
The market for Buses and trucks include Hino-Pak Motor, National Motor, and
Ghandhara Nissan Diesel etc. The tractors market comprises of Al-Ghazi

Tractors, Millat Tractors. A brief profile of the three major players is given as
under:

Pak Suzuki Motor Company (PSMCL)

The firm was founded in September 1982 as a joint venture between the
government

of

Pakistan

and Suzuki

Motor

Japan,

formalizing

the

arrangement by which Awami Auto Ltd. had produced the Suzuki SS80 from
1982.[2] Suzuki originally owned 25% of the stock, and has gradually
increased their holding; they now own 73.09%. [3] Pak-Suzuki was a joint
venture between the semi-governmental Pakistan Automobile Corporation
(PACO), who had earlier overseen local assembly from kits. [4] Pak Suzuki is
the market leader in Pakistan Automobile Market by having more than 60 %
(December, 2011) of market share. Lacking serious competition, Pak Suzuki
has had a market share of more than 50% since its inception and has
complete monopoly in the small car segment. Apart from giving automobile
related services like Suzuki Finance and Suzuki Insurance, Pak Suzuki also
deals in Pak Suzuki Certified Used Cars.
Having assembled both the Carry and Jimny locally since 1976, Suzuki's first
locally built product was the 800 cc ST90 Carry van and truck. 25,000 per
year was the beginning production.[5] By 1984 the 1000 cc Jimny (SJ410) and
800 cc Alto/Fronte (called "FX") had been added to the lineup, and a second
plant was planned for 1985.[5] Cars built by Suzuki Pakistan often lack
essential features which are standard in other cars, such as airbags, rear
windshield defogger and rear seat belts. In 2006, Pak Suzuki offered factoryfitted CNG two years after rival Dewan Motors started offering the facility in
their locally assembled Hyundai Santros.[3] By 2012 the Pakistani-assembled
Suzuki Mehran remained possibly the last car in the world which still used a
carbureted engine, but from the end of 2012 Suzuki Mehrans have been
equipped with EFI engines to meet the Euro-II emission standards.

Maximum spare parts, Body & cars of Suzuki are manufacture in India and
coming to Pakistan through Japan, Singapore or UAE.

Indus Motor Company Limited (IMC)

Indus Motor Company Limited (IMC) was incorporated in 1989 as a joint
venture company between the House of Habib of Pakistan, Toyota Motor
Corporation and Toyota Tsusho Corporation of Japan. The Company
manufactures and markets Toyota brand vehicles in Pakistan. The main
product offerings include several variants of the flagship Corolla in the
passenger cars category, Hilux in the light commercial vehicles segment
and the Fortuner Sports Utility Vehicle. The manufacturing facility and
offices are located at a 105 acre site in Port Qasim, Karachi, while the
product is delivered to end customers nationwide through a strong network
of 41 independent 3S Dealerships spread across the country. In its 25 years
history since inception, IMC has sold more than 600,000 CBU/CKD vehicles
and has demonstrated impressive growth, in terms of volumetric increase
from a modest beginning of 20 vehicles per day production in 1993 to 240
units daily at present through the development of human talent embracing
the Toyota Way of quality and lean manufacturing. Over the years, IMC has
made large scale investments in enhancing its own capacity and in meeting
customer requirements for new products. Today, Corolla is the largest selling
automotive brand model in Pakistan and it also has the distinction of being #
1 in Toyotas Asian market.
The Company invests heavily in training its 2,300 plus workforce of team
members & management employees and creating a culture of high
performing empowered teams working seamlessly across processes in
search of quality and continuous improvement. The core values of the
Company encourage employees to pursue high standards of business ethics

and safety; communicating candidly by giving bad news first and to respect
people. The bi-annual TMC morale surveys show that employees rate IMC
high on work environment and level of job satisfaction. The Company has
played a major role in the development of the entire value chain of the local
auto industry and is proud to have contributed in poverty alleviation at the
grass root level by nurturing localization that, in turn, has directly created
thousands of job opportunities and transferred technology to over 60
vendors supplying parts. IMC is also a major tax payer.

Atlas Honda Limited

The Atlas Honda Limited is a joint venture between the Atlas Group of
Pakistan and Honda Motor Company of Japan. The Atlas Honda was created
in 1987 by the merger of Kamboh bikes Limited and Atlas Autos Limited.
Both these motorcycle manufacturing concerns were established by the Atlas
Group.

Atlas

Honda

manufactures

and

markets Honda

motorcycles in

collaboration with Honda Motor Company. Atlas Honda also manufactures

various hi-tech components in-house in collaboration with leading parts
manufacturers like Showa Atsumitech, Nippon Denso and Toyo Denso. Atlas
Honda Plants are located in Karachi, and Sheikhupura.
Honda Atlas makes two Honda Models in their plant located in Pakistan. They
are Honda Civic and City. Honda Atlas began their assembly of Honda City in
the year of 1997. The car was at first available in the 1.3 liter but soon was
available in both 1.3 and 1.5 liter engines. Along with these two models, the
company sells Honda Accord, Honda CRV, Honda HRV, and Honda CRZ to
Pakistani customers but they are imported from Japan.