Honda Atlas Cars Limited (HCAR) is set to make a significant entry into the hybrid vehicle segment in Pakistan with the anticipated launch of the Honda HR-V Hybrid.
This strategic move aims to compete with established models such as the Corolla Cross and Haval, as discussed in a recent analyst briefing following the company’s financial results.
Honda Atlas is investing approximately Rs5 billion to establish a hybrid vehicle manufacturing plant, though the timeline for this project remains undisclosed.
This announcement marks the company’s second major initiative in the hybrid market within a year. Analysts are optimistic about the market potential, but the HR-V Hybrid’s success will largely depend on its features and competitive pricing, as highlighted by JS Research analyst Wadee Zaman.
Despite economic challenges and subdued consumer demand, Honda Atlas has successfully navigated the fiscal year without significant issues related to letters of credit.
The company has also made progress in localizing its production process, with the Honda Civic achieving over 60% localization and the Honda City at 73%. However, the BR-V and HR-V models have lower localization rates, under 50%.
A tax benefit of Rs1.13 billion from accumulated minimum tax payments has contributed to a reduction in Honda Atlas’s effective tax rate for FY23-24. While the company’s imports mainly come from Thailand, with some from Japan, Honda Atlas has seen slight advantages from currency devaluation.
In addition to its hybrid ambitions, Honda Atlas is exploring export opportunities for spare parts and CPU components. The automotive sector faced a challenging year due to a 2% increase in the policy rate, leading to a 45% decline in the overall passenger car market.
Honda Atlas reported earnings per share of Rs1.42, reflecting a 40% year-on-year increase, although there was an 85% decline quarter-on-quarter. The company’s gross margins contracted from 8.4% to 6.5%, but Honda Atlas continues to maintain its competitive edge in the market.
With an expected decline in policy rates, the automotive industry in Pakistan is anticipated to rebound, especially in the lower car and hybrid segments. The sector is projected to regain a substantial market size within the next two years.
As Honda Atlas prepares to launch the HR-V Hybrid, it aims to capture a significant share of the emerging hybrid vehicle market, aligning with the growing consumer demand for more fuel-efficient and environmentally friendly options.