Karachi, July 25, 2024 – Honda Atlas Cars Limited (HCAR) is gearing up to enter the hybrid vehicle market in Pakistan, likely with the HR-V model, to compete with rivals like Corolla Cross and Haval, according to analysts. This announcement came during the company’s analyst briefing following its financial results.
Honda Atlas Cars Limited has earmarked a Rs5 billion investment for establishing a hybrid plant, though a specific timeline for the project remains undisclosed. This marks the second such announcement by the company in less than a year. While analysts anticipate a potential boost to the market, the success of the new model will hinge on its features and pricing, according to JS Research analyst Wadee Zaman.
Despite challenges posed by subdued demand and a shrinking economy, Honda Atlas managed to navigate the year without letter of credit issues. The company has also made strides in localizing its production, with Civic boasting over 60% localization and City at 73%. BRV and HRV, however, have lower localization rates, standing at less than 50%.
A tax benefit of Rs1.13 billion, resulting from accumulated minimum tax payments, contributed to a significant reduction in the company’s effective tax rate for FY23-24. While imports primarily originate from Thailand, with a smaller portion from Japan, Honda Atlas has benefited marginally from currency devaluation.
Honda Atlas Cars Limited is also exploring export opportunities for spare parts and CPU components. However, the auto sector grappled with a challenging year due to a 2% increase in the policy rate, culminating in a 45% decline in the overall passenger car market.
Honda Atlas Cars Limited reported earnings per share of Rs1.42, up 40% year-on-year but down 85% quarter-on-quarter. Gross margins contracted from 8.4% to 6.5%, although the company maintains its competitiveness in the market.
With the anticipated decline in policy rates, the automotive industry is expected to rebound, particularly in the lower car and hybrid segments. The sector is projected to regain a reasonable size within two years.