Karachi – Honda Atlas Cars Limited (HCAR) is preparing to make a significant entry into Pakistan’s hybrid vehicle market, potentially launching the HR-V model to compete with rivals like the Corolla Cross and Haval. This strategic move was revealed during the company’s analyst briefing following the release of its financial results.
Honda Atlas Cars Limited has announced a substantial investment of Rs5 billion to establish a hybrid vehicle manufacturing plant. Although the exact timeline for this project remains undisclosed, this announcement is the second of its kind from the company within a year. Analysts predict that while this move could invigorate the market, the new model’s success will depend heavily on its features and pricing. JS Research analyst Wadee Zaman emphasized that market reception will be crucial for the hybrid vehicle’s success.
Despite facing challenges from subdued demand and a contracting economy, Honda Atlas successfully navigated the year without issues related to letters of credit. The company has also made notable progress in localizing its production processes. The Civic model now boasts over 60% localization, and the City model is at 73%. However, the BRV and HRV models have lower localization rates, with less than 50% of their components produced locally.
A significant tax benefit of Rs1.13 billion, stemming from accumulated minimum tax payments, contributed to a notable reduction in the company’s effective tax rate for the fiscal year 2023-24. While most imports come from Thailand and a smaller portion from Japan, Honda Atlas has experienced marginal benefits from currency devaluation.
Additionally, Honda Atlas Cars Limited is exploring export opportunities for spare parts and complete power units (CPUs). The auto sector, however, faced a challenging year marked by a 2% increase in the policy rate, leading to a 45% decline in the overall passenger car market.
Financially, Honda Atlas Cars Limited reported earnings per share of Rs1.42, reflecting a 40% year-on-year increase but an 85% decline quarter-on-quarter. The company’s gross margins contracted from 8.4% to 6.5%, although it maintains a competitive stance in the market.
Looking ahead, with an anticipated decline in policy rates, the automotive industry is expected to experience a rebound, particularly in the lower car and hybrid segments. The sector is projected to regain a reasonable market size within the next two years, promising a brighter outlook for Honda Atlas Cars Limited and the broader automotive market in Pakistan.
