2. Automobile industry
The auto market is one of the largest segments in world trade. The annual size of
automotive export trade in the world has grown to a massive level of over US$ 600
billion, which accounts for about 10 per cent of the world export. Changing
models, improving fuel efficiency, cutting costs and enhancing user comfort
without compromising quality are the most important challenges of the auto
industry in a fast globalizing world. Hence there is a need for exploring the
industrial complementarities in the region for better quality, favourable costs, fuel
efficiency and attractive designs. Therefore, the requirement of information
exchange in the region is much more pronounced now than ever before for keeping
the auto industry afloat and competitive.
Pakistan Overview
Since its independence in 1947, Pakistan has been able to transform itself to a large
extent, from a completely agrarian economy to a fairly developed techno-industrial
base. Besides textiles, Pakistan’s exports are largely manufactured items such as
consumer durables and engineering products. However, it is also a fact that
Pakistan has not been able to realize its potential due to internal and external
compulsions and thus it lags behind many developing countries of the world. The
following economic indicators constitute the tell-tale of Pakistan’s development
performance:
3. Automobile Industry of Pakistan
The existing population of automotive vehicles in Pakistan is 3.9 million. The
annual demand is estimated at 300,000, two thirds of which is being met from local
sources and imports and the remaining one third is left unmet. The market value of
automotive vehicles in dollar terms is estimated at more than 1 billion, out of
which import constitutes around US$ 200 million. The aftermarket of auto parts is
estimated at US$ 500 million, imports and local production taken together.
Production figures of automobiles are given in the following tables:
Pakistan’s strength of production elements lies in its vast reservoir of land, labour
and even capital. But technology and purchasing power of the consumers are its
major weaknesses. Technology requirements are being met by joint ventures and
technology tie-ups with foreign players in automotive sector. Japanese, Korean and
European entrepreneurs have invested almost US$ 1.5 billion in Pakistan’s
automotive sector. The local investment in the automotive sector is approximately
US$ 1 billion.
4. KARACHIPLANT:
Atlas has undertaken to develop local manufacturing capabilities to the highest,
economically feasible level. While a major role in localization has been assigned to
vendor industries, Atlas has the country’s largest in-house manufacturing
capability at its Karachi and Sheikhupura plants. To support the production
facilities, the company has established an R&D wing and tool making facilities
through CDA & CAM, which are growing rapidly in size and function as the
company expands. Atlas has managed to execute 14 Joint Venture/Technical
Assistance Agreements between local vendors and foreign manufacturers for
transfer of technology.
Atlas Honda is playing a pioneering role in creating conditions for easy and
confident use of motorcycles all over the country. A vast and growing network of
over 1600 motorcycles sales service and spare parts dealers has been established.
In order to back up this system, Atlas has set up Technical Training Centers in
Karachi and Lahore, which provide several courses of varying duration and
complexity for motorcycle mechanics and users each year. Mobile training
facilities take the latest know-how, technology and maintenance of motorcycles to
major rural and urban centers around the country.
Vision
Market leader in the motorcycle industry, emerging as a globally competitive
centre of productionand exports.
Mission
A dynamic, profitable and growth oriented company through market leadership,
maximizing export and excellence in quality and service; to ensure attractive
returns to equity holders; reward employees according to their ability and
performance; to foster a network of researchers and engineers ensuing unique
contributions to the development of the industry; customer satisfaction and
protection of the environment by producing emission friendly green products and
to remain a good corporate citizen fulfilling its social responsibilities in all
respects.
Our slogan
For Honda to remain Honda, and for everyone to realize their aspirations, we must
believe in "The Powerof Dreams"
5. Company History
Since its inception the company has experienced an unprecedented growth in its
operations from a small manufacturing company to the leading motorbike
manufacturer of Pakistan. Following is the chronological order of the major events
in the company's history.
2009 Contribution to national exchequer reached Rs. 3.18 billion -
72% of wealth generated, out of Group 7.56 billion (1.48%
of the Government total revenues). LPDC project completed
(New Generation Of Technology). Stared implementation of
GDC & Case Damper Production Projects through Showa
Corporation, Japan. Launch 500 K Capacity Expansion
Project.
2008 Major re-adjustment of prices to pass on the benefits to
customers. Best Corporate Report award by joint committee
of ICAP & ICMAP. Achievement of landmark sales of
100,000 motorcycles. Technical agreement with Keihin
(Japan) for Mgf. Of Fuel Cock Assembly. Switch Assembly
Light & Winker + Ignition Coil.
2006 Deletion level reached to 87% and 80% for CD70 & CG125
respectively. Introduction of Gratuity Scheme for staff. Best
Corporate Report award by joint committee of ICAP &
ICMAP.
2007 Concept of 5S dealership - Sales, Service, Spare Parts,
Second hand exchange and Special (Credit) sales launched.
New Block for hi-tech engine plant.
2005 Investment in Crankshaft Project. TC Agreement with Toyo
Denso.
2004 ISO 9002 certification for both factories.
2003 New models (MMC) of CD70 & CG125 launched.
2002 Investment in Gear Project.
2001 Exports to Bangladesh. Export Agreement signed with
Honda Motor Company Limited.
2000 Mr. Kawamoto President, Honda Motor Company Limited,
visited AHL.
1999 Change of name to Atlas Honda Limited (AHL).
1998 Inauguration of CG125 Engine Project at Sheikhupura
Factory.
1997 Merger of Panjdarya Limited into Atlas Autos Limited.
6. 1996 Export of built up motorcycles to Nepal.
1995 Production capacity expansion III. Joint Venture agreement
signed with Honda Motor Company Limited.
1994 Inauguration of CD70 Engine Project at Karachi Factory.
1993 Technical Assistance Agreement with Showa Corporation.
1992 Deletion Project financed by PICIC.
1991 Commercial Production started at Panjdarya Limited.
Production capacity expansion II.
1990 Incorporation of Panjdarya Limited as Joint Venture with
Honda Motor Company limited.
1989 Production capacity expansion I.
1988 Public offering of Shares.
1987 Commercial Production started.
1986 Technical Assistance Agreement signed with Honda Motor
Company Limited. Incorporation of Atlas Autos Limited.
Management:
Maintaining a global viewpoint we are dedicate to supplying product of the
`highest quality yet a reasonable point for worldwide customer satisfaction. Honda
remains its rich culture of customer satisfaction, it being serving nation. For
management we have following our management strategy.
· Proceed always with ambition and youthfulness.
· Respect sound theory, develop fresh ideas, and make the most effective use of
time.
· Enjoy your work and encourage open communications.
· Strive constantly for a harmonious flow of work.
· Be ever mindful of the value of research and endeavor.
· Respectfor all – man has priority over others.
7. Threats
· Chinese cheaper products challenges.
· Free Trade & WTO.
· Strong competition from competitors in near future.
· Instability of Government.
· High rate of Taxation.
· Bad infrastructure.
. Input raw material especially steel prices, rubber and petroleum products.
Cost of Production
The company has best plant of the world; it enables it to produce more products
which cover the people needs by adopting conceptof “CostEffectiveness”.
Technology
As technology upgrade the quality of goods increases. That’s innovate products
which creates more demands thus resulting more supply.
External Environment Factors
Natural hazards and disasters badly damage product delivery and production
process which results in less supply. We have seen recently the earth quack which
damaged the market.
Government Policies
Government policies are always favorable for the Market leader in Pakistan.
Which take its supply to peak.
8. Future expectations
Company is excepting strong competition with its competitors especially cheap
bikes of china. In future they want to overcome the market so they will increase
their supply.
Taxation
Government has imposed huge tax on Atlas Honda Company. It is estimated that
company pays 35 % annual as Tax to government. This huge tax increases the
production costwhich reduces its Supply.
CIRCULAR FLOW OF INCOM AND PRODUCT
9. Condition of Honda in Product Market
Atlas Honda is the leader in motorcycle industry. It is selling three products named
as CD 70, CG 125 and CD100 respectively. CD 70 and CG 125 are old brands
while CD100 was launched on 11 October 2004 in Lahore on 13 October 2004 in
Karachi.
MOTORCYCLE MARKET V/S HONDAMARKET SHARE
It has market share of 56 % currently. It is the biggest manufacturer of motorcycles
in the country. Last year it produced 1,90,395 bikes. It means company achieved
62 % growth in production. Now according to the increasing demand and market it
has doubled its production capacity. The market size for two wheeler segment was
around 340,000, while demand for Atlas Honda touched 230,000. Parts of bikes
are being manufactured 85 % locally.
Last year an investment of 4 billion has come in the motorcycle industry, form that
Atlas Honda invested 2.5 billion alone. Honda is a popular brand in the market and
people want to buy it because of its quality, durability, after sale services and good
resale value. In the motorcycle industry Honda has become an aspiration group for
those who have some other brand.
10. Competitor
Brands
In Pakistani motorcycle industry Honda is a leader. Although there are 50 brands
of bike are available yet many of them have not got recognition among the people.
All these exist in different segments of markets.
Yamaha
It is a basically two stroke 100 CC motorcycle. It is very popular in villages
because people consider it more durable and a smooth driving bike on rough roads.
It is second second largest selling brand of Pakistan.
Sohrab
It is first Pakistani brand that was introduced. First time it introduced heavy bike
look in a four stroke and 70 CC motorcycle. Its price is low as compare to Honda
but. It is not direct threat for Honda. But to some extent people like it because it is
rapidly increasing its quality, after sales services and resale value. It is getting
popularity in villages.
Suzuki
It is third selling brand in Pakistan and it also targets the villagers. Its image is also
approximately same as Yamaha in the mind of people and it also targets the village
areas.
11. FINANCE
The Company has strong financial position. The year 2005-06 was a good year;
The Company undertook several major projects which were executed in a timely
and cost efficient manner. The sales revenue grew to Rs. 17.42 billion. This
represents an increase of 23.37 % as against the previous year’s Rs. 14.12 billion.
In the financial year 2007-08, your company continued to build on the successes of
the previous year by selling 360,108 units as compared to 287,184 units in the
corresponding period of 2007 which shows 25 % growth.
The gross profit margin for the period slightly decreases to 9.35 % from 9.52 % of
the corresponding period. This was largely due to unprecedented rise in raw
material prices and utility costs. However, the net impact has been more or less
offset by an increase in sales, volume, benefits of localization and efficient fund
management.
Operating Expenses
The operating expenses increased to Rs. 528.32 million as against Rs. 445.27
million for the same period last year. This escalation was in line with the increase
in sales and the launching of new CG-125 deluxe, a premium model. The increase
in interest rates and additional borrowing for capacity expansion and new projects
led to an increase in financial expenses to Rs. 151.61 million. The company had
budgeted this rise feels comfortable with the current capital structure ot finance its
growth. The company earned ever highest profit before tax of Rs. 1,047.06 million
as against Rs. 905.63 million for previous year a bottomline growth of 15 %.
Govt. Expenditures
The company paid taxes to national exchequer amounting to Rs. 5.034 billion
which are higher ever. On account of sales tax, income tax and custom duties as
against Rs. 4.5 billion contributed last year. Payment of these taxes was more than
7.5 times the net after tax earning. The company’s contribution to the national
economy by way of value addition this year amounts to 7.04 billion 71.46 % of net
receipts from operations 13.6 % higher as compared to last year.
12. Cash Flow:
The cash flow generated through the operating activities was Rs. 543.86 million in
2008 as compared with Rs. 1489.11 million during 2007. Net income after tax
increased to Rs. 676.83 million in 2006 from Rs. 597.12 million in 2005, reflecting
higher volume and growth on impact of Localization.
The positive cash flow during the year was mainly deployed for capital
expenditure (Rs. 2,125.86), debt repayment (Rs. 231.98 million).
Conclusion:
The reduction in tariff rates liberalization and global image of Pakistan has resulted
in substantial growth in foreign investment and exports. At the same time, there are
significant challenges that can be a threat if not addressed timely. The company is
faced with a great cost increase problem due to the continuous rise in input raw
material especially steel prices, rubber and petroleum products.
The year 2005-06 turned out much as planned, although the task was made harder
by the burden of global raw material price hike. Next year will be a difficult year
for the country economy. The business environment and the economy are
becoming more open and the business environment more difficult. The automobile
industry policy of deletion and “forced” localization have been abandoned by the
government. The implications are severe i.e. “survival of fitness”. In this
environment, competitiveness is the key success factor. However, your company is
well positioned in terms of capacity & efficiency. Barring any unforeseen
economics adjustment, Atlas Honda should maintain its growth momentum. There
is excepted strong competition from Chinese and its Japanese competitors. So
Honda should recover from its internal and external expenditures hence it would
reduce cost of production. Customers will buy more Atlas Honda in case if price
still low.
It is strongly believed that under WTO agreements the developing countries’
economies will be seriously affected. The auto industry, and especially the
motorcycle industry, is poised for growth. The results speak for themselves. This is
the time to further nurture the industry otherwise a great opportunity to diversify
the industry will be lost to the country.
