2012

LETTER OF TRANSMITTAL
08th December, 2012

Mr.Shahid Hameed
Course Instructor, Pakistan Studies
Institute of Business Management
Karachi.
We are students of Analysis of Pakistan Industries at IoBM and
have been authorized by our course instructor Mr. Shahid
Hameed to prepare a term report on Automobile Industry of
Pakistan.
We would like to thank our course instructor Mr. Shahid Hameed
for such practical knowledge that he has imparted throughout the
semester. We would also like to request to kindly accept this
report.
Sincerely,
Group Members:
Talha Rizwan 10016
Muhammad Anas 10628

2 | Page

ACKNOWLEDGMENT
First and Foremost we would like to thank The Almighty Allah who
gave us enough strength to fulfill this task. We are also extremely
grateful to Sir. Shahid Hameed for his immense cooperation for
this project.
We

would

like

to

acknowledge

Institute

of

Business

Management for all the support and proving such opportunity of

learning, through the agony of bearing with your demands and
expectations, we truly got to discover our potentials.
Making this report has immensely helped us in understanding the
industry dynamics of Automobile Industry of Pakistan and it
impact on the countrys economy.

Thanking You,
Talha Rizwan 10016
Muhammad Anas 10628

3 | Page

Contents
EXECUTIVE SUMMARY...........................................................5
INTRODUCTION.....................................................................6
OVERVIEW OF AUTOMOBILE INDUSTRY.................................7
Background................................................................................................... 7
Growth.......................................................................................................... 8

MANUFACTURING PROCESS.................................................10
Assembling Procedure................................................................................. 10

STRUCTURAL COMPOSITION................................................11
PRODUCT MIX OF THE INDUSTRY........................................11
Major Product Segments..........................................................................11
Product Mix of Major Motorcycle Brands in Pakistan................................11
Product Mix of Major Car Brands in Pakistan............................................12

INSTALLED CAPACITY...........................................................12
CAPACITY UTILIZATION........................................................13
COMPONENTS REQUIRED FOR MANUFACTURING................14
DUTY STRUCTURE...............................................................15
Taxation/Duty Structure-Used Cars.............................................................17

DEMAND & SUPPLY..............................................................18

Demand for Automobiles in Pakistan..........................................................18
Supply for Automobiles in Pakistan.............................................................20

MAJOR PLAYERS OF THE INDUSTRY:.....................................23

Major Players in Personal Vehicle Sector.....................................................23
Major Players in Motorcycle Sector.............................................................23

PORTERS FIVE FORCE ANALYSIS.........................................26

MAJOR PROBLEMS FACED BY THE SECTOR..........................28
CONCLUSION & RECOMMENDATIONS..................................30
BIBLIOGRAPHY....................................................................31

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EXECUTIVE SUMMARY
This report critically analyzes the present situation of Pakistans
Automobile Industry mainly focusing on the cars and motorcycles
sector. The report provides brief information about the history
and the evolution of the auto sector in the country.
The report also presents 5 years of data on the production and
sales of the auto industry and discusses the various active tax
and duty policies. The report also discusses the installed capacity
and the capacity utilization of the overall industry. The report
includes information about the installed capacity of the various
major players of the industry.
We have also conducted a demand/supply analysis to analyze
whether or not the local manufacturers are meeting the surging
demand for vehicles efficiently. We have also taken reference
from a research study conducted by the EDB and have tried to
show a direct relationship that exist between per capita income
and demand for vehicles. The report also talks about the
manufacturing process of cars and lists the generic raw materials
that are required for production.
The report also discusses the product mix of the cars and
motorcycles sector and presents brief information about the
various models and designs available in the market. We also
presented market share breakdown highlighting the major share
holders of the industry.
The report also analyzes the auto sector on the basis of Porters 5
forces framework and finally highlights some of the major
problems the industry is currently facing.
We have tried our best to ensure that all the figures included in
this report are relevant and authentic.

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INTRODUCTION
Automobile industry comprises of the companies which are, in
one way or the other, involves in the designing, development,
manufacturing, selling and marketing of motor vehicles. It
excludes all the deliverers and retailers of the motor vehicles as
well as the fuel companies.
Globally, it is one of the most significant industries in terms of the
human capital employed and revenues. Global Automobile
industry earns over five thousand billion dollars annually
($5,132Billion in the year 2011).
The first petrol power motor vehicle was invented by Carl Benz of
Germany, who later had it patented and began its production.
After sometime another German Gottlieb Daimler invented a
motor vehicle from scratch by removing the horse-drawn
carriage, which was also patented and commercially produced
and sold. But, it was not far when an Italian Enrico Bernardi
invented a motorcycle, which he later modified and made it a two
seater which was able to carry two adults.
United States of America had always been the leader in
automobile manufacturing because of the excessive demand for
automobile in the North American region, until it was overtaken
by Japan in the 80s by Japan. Japan became the hub of auto
manufacturing and had produced millions of cars and sold them
to the various parts of the world. Automobile remained the most
important sector of Japanese economy and played an important
part in the economic development of Japan.
Production By Countries (2011)
Ran
Country
Production
k
1
China
18,418,876
2
USA
8,653,560
3
Japan
8,398,654
4
Germany
6,311,318

But in 2006, China overtook

Japan to become the leading
automobile producer of the

6 | Page

world. Today, China produces almost the one fourth of the worlds
automobile production.

OVERVIEW OF AUTOMOBILE INDUSTRY

Background
In Pakistan automotive assembling started in 1950, when the first
Bed Ford truck was manufactured by the newly formed National
Motors Limited. National Motors Limited was established by
General Motors of USA. Since then, the industry has grown
considerably and is one of the significant sectors in Pakistani
economy. However, the country have to depend on the imports to
meet the internal demands and there is still a demand supply gap
presents in this sector, especially in the personal vehicle
segment.
Despite considerable production volumes, transmission of
technology and localization of vehicle components remains short,
and only some car models are assembled in Pakistan while
customers have a very small variety of vehicles to choose from.
The lack of competition in the auto industry due to the
dominance of a few players, and limitations on imports in the
form of heavy duties has resulted in inflated prices of Cars in the
country. Currently some of the significant international
automakers have set up assembly plants or are in joint ventures
with local companies which includes Toyota, General Motors,
Honda, Suzuki, Nissan Motors.
In Pakistan, assembling of motorcycles began in the 1970s when
Atlas Honda, which was a joint venture between the Atlas Group
and Honda Japan, started the manufacturing of Honda CD 70 a 4
stroke motorcycle. In 1983 another company Pak Suzuki
Motorcycles entered the thriving motorcycle market. Also in 1983
PAMA which is a trade association for the automobile industry
came into existence. The original equipment manufacturers that
initially joined PAMA were Atlas Honda, Dawood Yamaha Motors
7 | Page

and Pak Suzuki Motorcycles. In the 1990s three more original

equipment manufacturers namely, Fateh Motors, Pakistan Cycle
Industrial Cooperative Society Limited and Siagol Qingqi Motors
Ltd also joined PAMA. Currently the industry consists of over 70
motorbikes manufacturers. The motorcycle industry is one of the
only few sectors of the economy that has managed to maintain a
sustainable growth rate. The industry reported a CAGR of 58%
from 2001 to 2005. In 2005 Pakistan became the 7 th largest
producer of motorcycles by producing 751,000 units and
acquiring 2% of the global market share. The industry has got
deep backward and forward linkages with various other
industries. Backward linkages includes, links with industries such
as steel, glass, plastic, rubber, paint etc. Whereas forward
linkages includes, links with industries such as dealerships,
retailers, tyre manufacturers etc. If compared to other vehicles
such as cars, trucks, buses etc, the demand for auto parts is the
highest in the motorcycle industry which is 60%. In 2008-09 the
motorcycle production accounted for 75% of the total auto
production. Currently the industry has the capability of producing
approximately 2,500,000 motorcycles per annum. The industry
has achieved over 90% localization and this localization has
resulted in the growth of the local vending industry and has
created large opportunities for jobs in the country.

Growth
The Global automobile Production for the year 2011 was
80,092,840 units which grew by an average growth rate of 5.5%
from 2005-2010. BCG (Boston Consulting Group) proposes that,
by 2014, demand for personal vehicles and Light commercial
vehicles in the four BRIC markets (Brazil, Russia, India and China)
will be the one-third of the global demand. Other significant
automotive demand lies in emerging economies like Iran,
Indonesia and South Korea. Emerging nations already buy more
cars than established automotive markets like US and Europe.
According to a study, emerging auto markets accounted for 51
percent of the global light commercial vehicle sales in 2010.

8 | Page

In Pakistan, personal vehicle sector has experienced an unsettled

trend primarily because of the economical dynamics of the
country and government regulations regarding the import of the
semi finished and finished goods.
The motorcycle sector is one of the most rapidly growing sectors
of the economy. This is
the only sector that has
managed to maintain a
sustainable growth rate in
the past decade. The
industry has maintained a
growth rate of 15% YoY
for the last five years. The
industry has achieved
95% localization. At the
start of the millennium
the
production
of
motorcycles in the country was 119169 units.
Currently Pakistan is manufacturing almost 2 million motorcycles.
The industry is not only meeting the local demand but has also
started exporting motorcycles to Srilanka, Bangladesh and
9 | Page

Afghanistan and is becoming a strong source of foreign exchange

for the country. In 2011 Atlas Honda alone exported 12450 units
to various countries.
Motorcycle sector Growth in Pakistan

The
industry
is
expected to show
Year
consistent growth,
2006-07 12%
11%
as the demand for
2007-08 26%
25%
new
motorcycles
2008-09 -13%
-13%
keeps on surging. To
keep pace with the
2009-10 50%
50%
increasing demand
2010-11 17%
17%
Atlas Honda made
an
additional
investment of $35 million this year to increase its production
capacity to 750,000 vehicles annually. Yamaha is also planning to
invest $150 million in the Pakistani motorcycle industry and this
will promote the manufacturing of modern and fuel efficient
motorcycles within the country. A special incentive plan has been
formulated for this purpose and a portion of land has been
allocated to the Yamaha Group at Port Qasim for Setting up a
manufacturing facility. Pakistan has emerged as a global leader in
the production of 70cc motorcycles and it is expected that
Pakistan will be among top five countries exporting high quality
motorcycles in the next couple of years. The table below presents
growth figures in terms of sales and production for the last five
years.
Growth in terms of
production

Growth in terms of
sales

MANUFACTURING PROCESS
(For Cars, LCVs, SUVs and trucks)

10 | P a g e

Assembling Procedure
(Industry Practices for assembling)

11 | P a g e

STRUCTURAL COMPOSITION
PRODUCT MIX OF THE INDUSTRY

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Major Product Segments

Product Mix of Major Motorcycle Brands in Pakistan

Brands
Product Mix
Atlas Honda

CD70

Pridor (100cc)

CG125

Dawood
Yamaha

Junoon (70cc)

Dhoom (100cc)

Mini 100

Pak Suzuki

Raider (110cc)

SPRINTER ECO
(110cc)

SPRINTE
R (110cc)

Sohrab

SD70

S100

Deluxe
(125cc)

GS 150

Product Mix of Major Car Brands in Pakistan

800cc

Suzuki
Mehran

Honda

Toyota

Daihatsu
Cuore

Hyundai

Bolan
1000cc

Cultus

Santro

Alto

12 | P a g e

13002000cc

Liana

Civic

Swift

City

Corolla

INSTALLED CAPACITY
At present, in the personal vehicle and light commercial vehicle
segments of the automobile industry in Pakistan, there are only a
few companies which are assembling some of their models in
Pakistan. Those models are the ones with the highest demands.
Other prestigious and expensive models are mostly imported.
Hence, the capacity available in this segment doesnt reflect the
sales of the car. However, it necessarily reflects the production of
cars within the economy. Table below shows the capacity
available for producing cars and light commercial vehicles.
Capacity
unit/annum

Pak Suzuki Motor Co. Ltd, 150,000

Karachi
Indus Motor
Karachi

Co.

Ltd, 50,000

Honda Atlas Cars (Pak) 20,000

Ltd, Lahore
Ghandhara Nissan Ltd

6,000

Dewan Farooq Motors Ltd

25,000
251,000

At present the motorcycle sector of Pakistan consists of more

than 70 manufacturers. The cumulative installed capacity of the
local motorcycle industry in 2009/10 was 1,870,000. Currently the
capacity of the industry according to APMA is 2,500,000. Table
below highlights the installed capacity of some of the major
players of the industry.

13 | P a g e

Manufacturer

Installed Capacity

Atlas Honda

800,000

Pak Suzuki Motor

50,000

DYL Motorcycles

150,000

D.S. Motors

125,000

N.J. Auto Industries

125,000

Memon Motors

125,000

Metro Hi-Tech

50,000

CAPACITY UTILIZATION
In 2011-2012, Personal vehicle segment of the industry had the
capacity utilization of 61.5%. 154,255 units of cars and LCVs
were produced from the available capacity of 251,000.
In the motorbike segment of the industry the capacity utilization
for the year 2011-12 was 64 percent.

COMPONENTS REQUIRED FOR MANUFACTURING

Following are some generic components which are required for
almost all kinds of automobiles ranging from a motorcycle to a
heavy duty truck.
1. Body frame: Welded frame system, assembled frame system,
handles etc
2. Plastic components: Plastic component system
3. Suspension: Drive related system, rear axle, rear brake, front
axle, front brake, UBS brake, ABS brake
14 | P a g e

4. Frame suspension: Frame linkage, front fork damper,

steering system (handlebar), turning handle
5. Transmission: Differential, drive shaft, belt, chain
6. Transmission
transmission box

box:

Auto

transmission

box,

manual

7. Engine: Cylinder head (air inlet), cylinder system, crankshaft

system, transmission, air intake system, accessory system
8. Air intake system: Air filter, inlet tube
9. Cooling system: Radiator, reserve water tank, cooling water
tank
10. Fuel system: Fuel injector, fuel tank, fuel line
11. Exhaust system: Exhaust pipe, muffler, other
12. Vehicle wiring system: Wiring diagram, main wiring,
secondary wiring, ECU line, diagnostic cable, power cable, battery
cable, motor starting cable, battery cable, grounding wire, fuse
wire, charging circuit
13. Ignition system: Ignition system, ignition chip, ignition wire,
spark plug cap
14. Charging system
15. Starter system: Starter motor
16. Converter: Converter, charging socket
17. Lighting and lamp system:
Headlight, glove box light, turn signal light, rear light, license
plate light, reflector, rear window brake light, glove box light, rear
position light
18. Switch system: Key lock switch, electronic switches, resistor
switch, gear switch assembly, start switch

15 | P a g e

19. Meter/indicator system: Indicating instrument, tachometer,

speed meter, wheel speed indicator, temperature indicator, oil
level indicator
20. Other control and sensors: Engine stalling controller,
speakers, police car sirens group, fuses, relays, sound muddling
devices, lighting, IC KEY, KCSS, wheel speed sensor
21. Fuel injection system: Fuel injection system electronic
controller, fuel pump assembly, cooling fan assembly, nozzle,
sensor
22. Other electronic components: Flash, timer, tire pressure
controller, instrument control, variable resistor, diagnostic tool,
driver group, relay group, regulator
23. Other parts: Cargo basket, rear frame box

DUTY STRUCTURE
Earlier this year the Economic Coordination Committee (ECC)
decided to slash duty on imported CKDs to 5 percent from 15
percent, on locally manufactured CKDs to 25 percent from 47.5.
Import duty on CBUs was reduced to 35 percent from 65 percent.
Import duty on import of raw materials was proposed to be
maintained at 0 percent and sub-components and components at
5.0 percent.
For the new entrants the duty on the imports of parts was cut
down to 10% from 15%. It was also announced that for new
entrants the duty on locally manufactured CKDs will be 10
percent for three years. Concession for new entrants is linked
with indigenization and they will be required to achieve 20%
localization in the first year, 30% in the second year and 50% by
the third year. Duty on engine and automatic transmission will be
5 percent.

16 | P a g e

Reduction in the import duty on CBUs came as a surprise for the

local manufacturers. Pakistan Association of Automotive Parts
Accessories
IMPORT DUTY STRUCTURE
Imported CKDs

5%

Locally
CKDs

25%

manufactured

Locally
manufactured
CKDs (for new entrants) 10%
CBUs

40%

Raw Materials

0%

Sub-components

5%

Engine and
transmission

5%

automatic

New pneumatic tyres of

rubber
25%
Inner tubes of rubber of
a kind used on motor
cycles
25%
Sign-plates,
nameplates,
address-plates
and
similar
plates,
numbers, letters and
35%
other symbols, of base
metal
Taps, cocks, valves and
similar appliances for pipes,
boiler shells, tanks, vats or
the like
35%

Manufacturers (PAAPAM) heavily

criticized the tariff reduction
measures taken by the ECC
claiming that due to adverse
policy measures and the import
of used vehicles, the industry is
already suffering from excess
capacity and such reductions
will further damage the local
manufacturers.
PAAPAM also claimed that the
motorcycle industry recorded
tremendous growth rates in the
last ten years and with proper
focus the auto sector can single
handedly
revive
Pakistan's
industrial sector and that the
auto industry is one of the top
five industrial sectors of the
country in terms of contribution
to tax revenue. Critics also
believe that the tariff reduction
measures are taken only to
accommodate one particular
manufacturer i.e. Yamaha, since
it is planning to invest $150
million in the local industry.

Arshad Awan CEO of General

Engineering also criticized the
decision
by
saying
that
reduction in duty on completely
built-up units would boost imports of the two-wheelers and
17 | P a g e

definitely hurt the local motorbike industry. He also added that

China which is the largest producer of motorcycles in the world
with a production level of 27 million units in 2010-11 maintains a
90% custom duty on CBU imports, under strict monitoring and
regulation by the Chinese government.
The table below presents the import duty figures for CBUs and
CKDs from the year 2001 to 2011.
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

CBU'
s

105
%

90%

75%

75%

75%

75%

65%

65%

65%

65%

65%

CKD'
s

25%

25%

20%

30%

30%

30%

47.50
%

47.50
%

47.50
%

47.50
%

47.50
%

The government has also discontinued the duty drawback facility

and this has negatively impacted the exports of motorcycles.
Pakistan mainly exports to Afghanistan and due to the withdrawal
of the duty drawback the country is experiencing a decline in
exports. Atlas Honda exported 13000 units to Afghanistan in the
fiscal year 2011-12, but due to discontinuation of the policy they
only managed to export 1000 units in the first three months of
the fiscal year 2012-13. Chairman of Association of Pakistan
Motorcycle Assemblers (APMA), Mohammad Sabir Shaikh claimed
that exporters used to ship 70cc bike at $360 to $390 per unit
and that the withdrawal of duty drawback caused the bike
assemblers to raise prices to $400 to $450 per unit, which
Afghanistan deemed expensive. So, the exports of bikes to
Afghanistan have suspended and Afghanistan has started
manufacturing bikes locally.

18 | P a g e

Taxation/Duty StructureUsed Cars

Under special regime taxes
levied covering Custom Duty,
Sales Tax, Income Tax and
Capital Value Tax based on
engine capacity.

DEMAND & SUPPLY

Demand for Automobiles in
Pakistan
According to a research conducted by the Freedonia Group, a
Cleveland-based research firm the global demand for
motorcycles, which was 79.2 million units in 2008, will increase at
a rate of 7.6% per year through 2013 to 114 million units. In 2008
82% of the worlds demand for motorcycles was from the
Asia/Pacific region. Since Pakistan is a developing economy and
motorcycles are a cheap source of conveyance, their demand is
ever increasing. The total production in 2011-12 was over 1.6
million and is expected to increase to 2 million units. At a recent
forum on auto sector arranged by the Jang group, the director
general of PAMA Abdul Waheed Khan said that the country
annually needs 1.5 million motorcycles and that the industry has
higher production capacities than the current demand.

Local annual demand for

various vehicles
Cars

192,00
0

trucks and buses

16,000

Tractors

700,00
0

Motorcycles

1,500,0
00

19 | P a g e

Demand for motorcycles in Pakistan is often seen as a reliable

measure of the health of the rural economy and most of the
motorcycles are sold in small towns and villages. Almost 60% of
the demand for motorcycles comes from rural areas According to
a survey global food prices have almost doubled in the last six
years, resulting in higher disposable income amongst many rural
households. Annual disposable income of Pakistan increased from
US$ 117,254.8 in 2008 to US$ 199,125.5 in 2012, so the
increasing disposable income is one factor that justifies the
increasing demand of motorcycles.
Annual disposable income(US$ million)
2008

117,254.80

2009

133,040.50

2010

150,186.50

2011

187,578.60

2012

199,125.50

A research conducted by EDB somewhere in 2006 indicates a positive relationship

between an increase in per capita income and motorcycle sales. The table below relates
per capita income with increase in annual demand from the year 2001 to 2006.

Year

Per

Annual

Populatio

New

% change

capital

demand in

n 000

motorcycle

decrease`

income

units

per person

us$
2001-

492

120,627

143,825

1193

579

175,169

146,845

838

2002
2002-03

30%

20 | P a g e

2003-04

657

371,007

149,929

404

52%

2004-05

742

570,085

153,077

269

33%

2005-06

847

751,667

156,291

208

23%

21 | P a g e

Supply for Automobiles in Pakistan

Cars and Light Commercial Vehicles

Pakistan is the 34th in the list of producing Cars and Light
commercial vehicles. Automobile industry of Pakistan is the
second largest indirect tax payer in terms of customs duty, sales
tax and withholding tax (Rs 63 billion)
It s GDP Contribution to countrys economy is around US$ 3.6
billion

Production & Sales of Cars and LCV's

180,000
160,000
140,000
120,000

Production

100,000

Sales

80,000
60,000
40,000
20,000
2008

2009

2010

2011

2012

Trucks And Buses

22 | P a g e

Production & Sales of Trucks And Buses

7,000
6,000
5,000

Production

4,000

Sales

3,000
2,000
1,000
2008

2009

2010

2011

2012

Tractors

Production And Sales of Tractors

80,000
70,000
60,000
Production

50,000

Sales

40,000
30,000
20,000
10,000
2008

2009

2010

2011

2012

Jeeps and Pickups

23 | P a g e

Production and Sales of Jeeps & Pickups

25,000
20,000
Production

15,000

Sales

10,000
5,000
2008

2009

2010

2011

2012

Two Wheelers & Three Wheelers

Production from July 2011 to June 2012 including three wheelers
was 1,602,702 units. The following table provides the 5 year
production data of motorcycles in Pakistan up till 2011

Category of Manufacturer

200607

200708

200809

200910

201011

Pakistani Assemblers total

production

42462
9

50327
8

48732
1

75803
8

90479
7

Non-APMA Members total

production

41522
1

55082
4

43030
7

62236
6

70588
4

CBU imports from China

156

Total production

83985
0

10541
02

91762
8

13804
04

16106
81

Table below presents the production and sales figure for the last
five years. These figure indicates that the production level have
always managed to exceed sales. This indicates existence of
excess capacity and that the local manufacturers are efficiently
meeting the surging demand for motorcycles.

24 | P a g e

25 | P a g e

MAJOR PLAYERS OF THE INDUSTRY:

Major Players in Personal Vehicle Sector
Pak Suzuki
Pak Suzuki Motor Company Limited was
established as a joint venture between
Suzuki Motor Corporation (SMC) of Japan
and Pakistan Automobile Corporation
(PACO) in the year 1983. Commercial
operations were started in 1984 with the
production of Suzuki FX model. In 1988,
Mehran and Khyber models were also
started to produce. In 1992, new plant for
the Margalla model was commissioned. In,
1998 Baleno model took place of Margalla.
And, in 2009 1millionth vehicle was produced by Pak Suzuki.
Today, Pak Suzuki is producing Swift, Liana, Cultus, Alto and Bolan
models in the Personal vehicle segment and has the highest
market share of 49%.
Honda Atlas Cars Pakistan Limited
Honda Atlas Cars Pakistan Limited is a joint venture between
Honda Motor Company Limited Japan and the Atlas Group of
Companies, Pakistan.
The company was incorporated on 4th November, 1992 and
agreement of joint venture was signed on August 05, 1993. On
16th July 1994 commercial production was started and the first
Civic car was launched in 1996. A model of City variant was also
launched
a
year
later
in
1997.
Major Players in Motorcycle Sector

26 | P a g e

Atlas Honda:
The company was established in 1988 as a joint venture of the
Atlas Group and Honda Motor Company, Japan. Atlas Honda is
recognized as a market leader in the motorcycle industry
maintaining a market share of almost 70% in terms of sales. The
companys plants are located in Karachi and Sheikhupura.

Manufacturer

Market
Share

Atlas Honda

71%

Dawood
Yamaha

10%

Hero

5%

Sazgar

6%

Pak
Motors
Others

Suzuki
3%

Companys flagship models are CD

70, CD 100 and CG 12. Beside this
the Atlas Honda also recently
introduced two new models, the new
CG 125 Deluxe and Pridor. Atlas
Honda is also the first company to
make use of the Euro II technology
in Pakistan.
Net
income
increased
from
1,002,556,000 to 1,204,109,000.
Pak Suzuki Motor:

5%

27 | P a g e

Pak Suzuki Motor Company limited was established as a joint

venture between Suzuki Motor Corporation, Japan and Pakistan
Automobile Corporation (PACO) in 1983. In 2007 the Suzuki
Motorcycle Pakistan Limited merged into Pak Suzuki Motor
Company. Pak Suzuki Motors is
the second company after Atlas
Honda
to
manufacture
motorcycles based on Euro II
technology in Pakistan. The
company manufactures Sprinter
ECO, Sprinter, and GS-150. They
have recently introduced a new
model called Raider, an 110cc
bike with Euro II technology. In
2011
the
company
also
inaugurated its new plant at Bin
Qasim.
3rd quarter report from july to September shows a net loss of
193265000 compared to a profit of 392,666 last year
Dawood Yamaha Group:
Dawood Yamaha is the third major manufacturer of motorcycles
in the country. The company manufactures YAMAHA motorcycles.
Companys manufacturing plant is located at Hub Chowki and the
assembling plant is located at Uthal Industrial Area, Distt:
Lasbella, Balochistan. The company manufactures 4-stroke
Dhoom and Junoon models and 2-stroke YB100 model. Beside the
company has also introduced its first Euro II based motorcycle the
new Mini-100.
Sohrab:
The company was established in 1952 in Lahore and pioneered in
the manufacturing of bicycles. Sohrab entered the motorcycle
market in 1994 with its JS70 model. Sohrab has also diversified its
cosumer base and is currently exporting to Bangladesh and

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Afghanistan. S100 and SD70 are some of the models that the
company manufactures.
Habib Motorcycles:
Habib Motorcycles (Pvt.)Ltd. Is the latest venture of the Habib
Group of Companies. The company has collaborated with leading
international automobile manufacturers and has introduced its
HB70 motorcycle. The motorcycle has managed to appeal the
consumers and is doing very well in the market.
Ghani Automobile Industries:
The company was established in 2004. The company is a
collaboration of Ghani Group of Companies & Chongqing Yingang
Science and Technology Group Company Limited.
The
manufacturing facility of the company is located in Lahore. Ghani
Automobile Industries currently manufactures 70 cc & 100 cc
motorcycle, 100 cc 3-wheeler motorcycle rickshaw & 200 cc
water-cooled CNG Rickshaws. Some of their wellknown models
include Ghani Gr-05 CC, Ghani Gi-100 CC, Ghani Gi-150-9 etc.

PORTERS FIVE FORCE ANALYSIS

Favorable

Moderate

Unfavorable

Threat Of New Entry

Economies of
scale

Favorable

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Product
differentiation

Moderate

Capital
Requirement

Favorable

Switching Cost

Favorable

Access to
distribution
channels

Unfavorable

Government
Policy

Unfavorable

Bargaining power of Supplier

Differentiation
of inputs

Moderate

Importance of
volume to
supplier

Favorable

Threat of
forward
integration

Favorable

Supplier
concentration

Favorable

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Presence of
substitute
inputs

Moderate

Bargaining power of Customers

Buyer
concentration

Favorable

Buyer volume
Buyer
switching
costs

Moderate
Favorable

Buyer
information

Moderate

Impact of
quality /
performance

Unfavorable

Rivalry among existing competitors

Industry
growth
Fixed costs

Favorable

Unfavorable

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Number of
competitors

Unfavorable

Threat of Substitutes
Switching cost

Favorable

Buyer
propensity to
substitute

Favorable

Summary of Five Force Analysis

Five Forces

Result

Threat of New Entrants

Threat of new entrants is low

Bargaining Power of Buyers

Bargaining power of buyers is low

Threat of Substitutes

Threat of substitutes is moderate to

low

Bargaining Power of Suppliers

Bargaining power of suppliers is high

Intensity of Rivalry Among

Competitors

Intensity of rivalry is moderate

MAJOR PROBLEMS FACED BY THE SECTOR

FAILURE TO INTRODUCE MODERN DESIGNS:
Pakistan is facing some serious competitions from India and
China in the international market. Pakistan has already lost
Srilanka and Bangladesh and its position in Afghanistan is
32 | P a g e

also weakening. One of the reasons behind this is the fact

that local manufacturers have not been able to introduce
new designs and models as compared to India and China.
Pakistan manufactures 70cc, 100cc and 125cc motorcycles
with generic designs and product differnetiation is very low.
On the other hand India has managed to introduce a large
range of motorcycles with new designs and specifications at
prices as low as $320. Since Pakistan has given India the
MFN status, the Pakistani market will experience an influx of
Indian
manufactured
motorcycles
and
beside
the
government is also plannig to eliminate the negative list of
items by the end of this year

ACTIONS OF NON-PAMA OEMS:

Some of the actions of the orignal equipment manufacturers
that are not the members of PAMA are also negatively
affecting the industry structure. For instance they are
indulging in sales tax evasion by not declaring actual
production figures and they are also found to be using
imported parts purchased from local importers and declaring
them as parts produced by the local manufacturers.

INCREASING PRICES OF RAW MATERIALS:

Prices of some the very basic raw materials used in the
manufacturing of motorcycles such as polycarbonate, alloy,
metal etc have increased drastically. Rubber per bundle used
to cost PKR 1250 in 2007 whereas in 2011 the prices per
bundle increased to PKR 2500. The glass sheets used in the
manufacturing of head lightts, tail lights and indicators
currenty costs PKR 450 per bike. The pair of rear view
mirrors used to costs PKR 750 back in 2007 but in 2011 the
33 | P a g e

prices have increased dramatically to PKR 1500. Increase in

manufacturing costs has also resulted in an increase in the
price of motorcycle. The price of Honda motorcycles has
goneup from 58000 to 68500. The appreciating value of Yen
against the Pakistani rupee is also another factor that forces
manufactures to increase prices.

SMUGGLING OF SPARE PARTS:

Mass scale smuggling of spare parts is not only affecting the
genuine importers but has also taken its toll on the overall
industry. Smuggling of auto parts from China through Sust
Border and Afghan Transit Trade have increased drastically
and is causing millions of rupees losses to the government
and the national exchequer. The reasons behind this
increased smuggling are the high duties that the importers
are required to pay. Currently the importers of motorcycle
auto parts are paying 80 to 85 percent taxes including 35
percent import duty, 17 percent additional duty and 16
percent sales tax. The only sound way to control smuggling
and increase trade through legal channels is by lowering
duties and taxes.

NO SINGLE MANUFACTURER OF ENGINES AND OTHER

COMPONENTS:
Even though the motorcycle industry has achieved high
levels of localization i.e. over 90%, there is not a single
facility that manufactures complete engines. Major auto
parts such as carburetor, Drive Chain, and other engine
components such as cylinder head, ring piston set, bearings,
bushes, timing chain, crankshaft etc are still imported from
other countries.
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CONCLUSION & RECOMMENDATIONS

Overall the performance of the auto sector is satisfactory. The
industry has got a huge potential for growth as number of cars
per person is increasing and the industry has got excess capacity
which will allow it to meet the increasing demand for vehicles.
One thing that is disappointing is the fact that the industry has
been operating for more than 30 years and has managed to
achieve high levels of localization i.e. 75% for cars and 95% for
motorcycles yet the local manufacturers have not been able to
manufacture complete engines and other major auto parts within
the country and rely on imports. The government also needs to
devise a consistent policy for the auto sector. The government
should not abruptly end the protection given to the auto sector.
One good decision taken by the government this year was the
ban on the imports of cars that are used for more than 3 years.
The government should also consider revising the import duty
structure as the government currently slashed down duty on
CBUs from 65% to 40%. With the import duties being so low, it
will encourage importers to import vehicles from other countries
and their actions will cause significant damage to the local
industry.

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BIBLIOGRAPHY
http://www.wikipedia.org/
http://www.pama.org.pk/
http://www.competitiveness.org.pk
http://www.motorcycleexport.com/
http://www.cbr.gov.pk/

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