Honda halts production in Pakistan, Indus to follow

[Mav3rick]

Sir, Please take into account following points

1. Auto Manufacturers get full payment months in advance, So they are managing business with money of customers. Less financial risk = less reward, higher financial risk = higher reward is basics of business.
2. Major portion of manufacturing cost of car is the CKDs/SKDs which are manufactured by same company / associated partners in different country and is sold on profit to company in Pakistan. So, profit in Pakistan is just a portion of profit for parent company actual profits are taken from these CKD/SKDS & Parts.

Good points. So basically overall The company wins at both ends. This is why our Auto-Policy should force 100% local manufacturing. I guess these Japanese companies will only manufacture locally if they are able to produce cheap, surplus units for export.......and we can export to Afghanistan, Iran and maybe some other central Asian counties.

I personally know a Japnese company (although not auto manufacturer itself but linked to industry) whose local company is in loss for years but still don't close the company. Reason is that they are earning profits on raw materials they are selling to that local company to manufacture products, the loss in local subsidiary is much less than profits earned on raw materials hence despite being in loss that subsidiary company is contributing to consolidated profits.

Fair enough, I guess.

And see there's the thing. If we finally have a manufacturing base, it will also assist in a support infrastructure, a whole eco-system for support of the Auto-industry.

 

[Verve]

Dealerships were selling with ON and now there's regulation on that hence the ON specialists are not placing orders anymore so these manufacturers are reducing supply instead.

Plus they are all in breach of their original agreements to localise manufacturing to 90%+. Now they should suffer.

When I moved back, instead of buying a brand new City and paying ON I went for an older automatic civic and pretty much sat 2 weeks at the workshops supervising rebuild of the whole suspension, full strip and booth respray, interior refresh (original leather re-tanned) and all other little niggles. Sold the CNG fitted to it as well, crap system! It cost me far far less and I had a far more comfortable and stronger car than the new tin can City. I would have even rebuilt the engine but the wet and dry compression tests were strong so left that untouched.

People need to smarten up and stop being blackmailed by these ba$tards.

And it will be good with other manufacturers entering the market. This will drive the second hand car values down too and the competition for new sales will stabilise prices.

 

[ALi Rizwan]

They have been only players in Pakistan under protection for decades, How much they have localized?

Can any one deny this facts?

This is what i said

High Profit margin 100% agreed.

But the Real question is do we have enough market for all these upcoming players.
Answer is absolutely no & in present condition some might not survive for long.

More Companies and more options of same car means less sales of a specific model resulting in smaller order for sub parts.

So on one end we want them to produce more parts locally and on other we introduced so many players that our existing market can't handle them.

No one can deny market need new players but do we have enough market for all those players????

If you think that introducing more players then market capacity is a right approach and it will help you in indigenization then their is no need to argue further.
We both have different assessment and only time will tell.

 

[ALi Rizwan]

Well, Pakistan is a market of 210 million people. If the prices are realistic, there should be no problem. They have been charging exorbitantly high prices.

Out of 210 million how many operate car? And whats present sale? Ir 2015 Registered cars/jeep etc were around 2.6~2.7 Million that is both old and new one. Majority still use bikes. Their was a huge boom in last 15 year but Car market is going down.
Prices were high because Demand was greater then supply. Now situation have change. One all units are operational you will see there is not enough demands.

This ugly, low quality, piece of shit costs PKR 1.295 millions for new car with an engine of 658cc

Its 8th Gen & HP is greater then 800cc Mehran and Chinese Car.
Competition have force them to brought in New Alto which is good.
Major market belong to small cars.
Problem is too many companies entering in Sedan and Larger Hatchback & others we don't have market for that.

For this amount (converted into SEK), one can get

Nissan Micra 2017-model with 1.2L i.e. 1200cc engine with a lot more features, better quality and materials, more space.
Or Ford Ka 2017-model with 1.2L etc.

Shouldn't a tin-box manufactured in Pakistan with half the engine (650cc) @cheap labour be half the prices of these cars? So they are sucking the blood.

How many cars we are importing now????? Its no more feasible to import them now.

You have 2 more options available in low cost/small cars like BRAVO & upcoming PRINCE.

 

[war&peace]

Its 8th Gen & HP is greater then 800cc Mehran and Chinese Car.
Competition have force them to brought in New Alto which is good.
Major market belong to small cars.
Problem is too many companies entering in Sedan and Larger Hatchback & others we don't have market for that.

bhai still the price is high..

 

[ALi Rizwan]

bhai still the price is high..

No doubt prices is too high. But we also need to consider other factors as well like Govt. Taxes and Devaluation of Currency.
But good thing is finally Mehran Chaptor is over.
People even make Joke about it that if you Buy Mehran in Parts Total Car will cost you around Rs 225k (Excluding Chases).

 

[Verve]

Demand was greater then supply. Now situation have change. One all units are operational you will see there is not enough demands.

New entrants will drive the second hand cars prices down and those who couldn't afford second hand cars before would be able to.

Right now people can't even afford second hand cars because of ridiculously high price tags.

More competition will lead to decline in prices. Demand is there for the right prices. These 3 looters are going to get hurt real bad in coming years because new entrants will price them out to gain market share. Best policy for them would be to keep prices lower but they are going in the opposite direction, so foolish this short term strategy.

 

[Mav3rick]

New entrants will drive the second hand cars prices down and those who couldn't afford second hand cars before would be able to.

Right now people can't even afford second hand cars because of ridiculously high price tags.

More competition will lead to decline in prices. Demand is there for the right prices. These 3 looters are going to get hurt real bad in coming years because new entrants will price them out to gain market share. Best policy for them would be to keep prices lower but they are going in the opposite direction, so foolish this short term strategy.

Can you give us a few examples of the 'New Entrants' which are set to take over and give us options against Xli, Gli, Altis, Civic, City etc., and compare their 'introductory prices' with their competition?

The Audi A3 was introduced with a price tag of Rs. 3.8 million (basic package) which many buyers of the top of the line Toyota's and Honda's could potentially afford. Today, the same Audi A3 is retailing for Rs. 7.6 Million (thanks to rupee devaluation). It is twice as more expensive. Furthermore, Pakistan is possibly the only country where Audi A3 comes in with a 1.2 Litre Turbo Engine (all over the world it is 1.6 Litre or higher); the reason for this smaller engine is to save on import duty so that the car price stays reasonable (which it isn't any more). I know that most of the Pakistanis cannot afford the Audi's, however the reason to give it's example was because it was the newest entrant.

The only way to get the prices down to reasonable levels is to force the auto-makers to produce in Pakistan.

 

[Verve]

The only way to get the prices down to reasonable levels is to force the auto-makers to produce in Pakistan

Yes but as they are in breach of contracts it's fine if they close factories or even GTFO altogether. Many other assemblers lined uo.

Replacements will come.

 

[Jango]

Can you give us a few examples of the 'New Entrants' which are set to take over and give us options against Xli, Gli, Altis, Civic, City etc., and compare their 'introductory prices' with their competition?

The Audi A3 was introduced with a price tag of Rs. 3.8 million (basic package) which many buyers of the top of the line Toyota's and Honda's could potentially afford. Today, the same Audi A3 is retailing for Rs. 7.6 Million (thanks to rupee devaluation). It is twice as more expensive. Furthermore, Pakistan is possibly the only country where Audi A3 comes in with a 1.2 Litre Turbo Engine (all over the world it is 1.6 Litre or higher); the reason for this smaller engine is to save on import duty so that the car price stays reasonable (which it isn't any more). I know that most of the Pakistanis cannot afford the Audi's, however the reason to give it's example was because it was the newest entrant.

The only way to get the prices down to reasonable levels is to force the auto-makers to produce in Pakistan.

Nice job comparing Corollas and Civics and City's with an Audi A3.

Well done mate, you've outdone yourself this time.

 

[Syed1.]

The need of the hour is from some Pakistani industrialists getting together and launching our own indigenous brand of car with full backing from the government. The car should be sharp and stylish (keeping in mind Pakistani psyche) and should be completely built in Pakistan which will inherently make it cheaper.


The problem with Pak car manufacturers has been too often they try to compete with Mehran in the lowest segment where instead they should have competed with the Civic or Corolla in the mid-to-upper tier. Remember that every famous car brand you see first started off by producing luxury or upper class cars and then moved to the lower segments as the margins are very small in that segment.

 

[Mav3rick]

Nice job comparing Corollas and Civics and City's with an Audi A3.

Well done mate, you've outdone yourself this time.

Comprehension problems mate? Need me to explain the following part of the same post:

"I know that most of the Pakistanis cannot afford the Audi's, however the reason to give it's example was because it was the newest entrant."

 

[Jango]

Comprehension problems mate? Need me to explain the following part of the same post:

"I know that most of the Pakistanis cannot afford the Audi's, however the reason to give it's example was because it was the newest entrant."

So why compare a luxury newest entrant to a mass production newest entrant?

That's like saying a Gulfstream has taken over the market of the Cessna.

It's not long to go until Q4, when Kia and Hyundai will start their production, so why not wait until then? We'll have much more solid understanding of the market dynamics at that point. Kia Elantra already spotted in Lahore btw.

 

[Mav3rick]

So why compare a luxury newest entrant to a mass production newest entrant?

That's like saying a Gulfstream has taken over the market of the Cessna.

It's not long to go until Q4, when Kia and Hyundai will start their production, so why not wait until then? We'll have much more solid understanding of the market dynamics at that point. Kia Elantra already spotted in Lahore btw.

You could simply have said this, instead of what you said in your earlier post.

Also, let me give you an example, a friend of mine bought an Audi A3 in lieu of Honda Civic Turbo, the difference in price was around 1.4 million. 5-10% of buyers of high end Honda/Toyota variants could potentially invest a bit more and buy Audis, the quality difference was massive when compared to the difference in price. But we lost all that now; 4.2 Million for Civic Turbo vis-a-vis 7 million for base line A3! Infact, even the Turbo is now a distant dream to many who could potentially buy it until early last year.

On the same lines, I seriously doubt new entrants would be able to penetrate the market unless they come with serious discounts, to the point of loss at their end. Or they will have to compromise on quality to compete with Ciaz, Xli, City etc.