Auto sector growth
Pakistan's car market is growing fast. According to a report, by 2022 Pakistan's car market could see growth from the current 200,000 units to 500,000 units, not counting the increase in the market for commercial vehicles or new ventures in that segment. Another estimatesays that Pakistan's passenger cars manufacturing capacity would go up to 443,000 units by 2022. According to media reports, ten new car ventures are entering the market. Many of the prospective plans have been realized-ground breaking ceremonies for Lucky-Kia and Nishat-Hyundai were held to kick start their greenfield plants while brownfield approval made for Ghandhara Nissan saw the revival of its assembly plant to produce Nissan's Datsun passenger car.
Much time has been spent lamenting that in a growing economy like Pakistan where the middle class is expanding and car purchasing has become relatively affordable, no new entrant identified smallengine compact cars as their target vehicles. In fact, most skirted around the subject. But there is a reason why the locally assembled Wagon-R is the fastest growing car right now, continuing its growth despite a recent 6 percent price hike.Suzuki has actually been the biggest beneficiary of growing auto demand-having grown its market share to now 58 percent (FY17: 53%). All of its small car variants have out-performed the market, simply because the incremental demand is coming in these categories of cars. Another proxy for the demand of small cars is the import of used cars which is around 60,000-70,000 units annually, mostly in the small-engine car segment with popular variants like Daihatsu Mira and Move, Nissan Dayz, Highway Star and Pixix, Suzuki Wagon-R (automatic) and Alto etc.
On the other hand, the MPV and adjacent segments in Pakistan have been growing. Toyota's SUV Fortuner has seen a fast incline while Honda's crossover SUV, BR-V has seen a dramatic jump in sales since it was introduced first end of 2016 as a locally assembled vehicle. These big, less suave vehicles are popular in some of the most developed economies as they are spacious enough for growing families while powerful enough for off-road travels. However small the market in Pakistan for that would be, it exists and is growing.
It was earlier estimated that the share of higher engine category may grow with the arrival of new entrants. While that can neither be confirmed nor denied just yet, two things should be pointed out. One, that we must not underestimate the high-end market. Premium money markets in the auto industry, however much of a nuisance it is, has picked up fundamentally because automakers cannot keep up with the demand for these cars; and are unable to deliver cars on time. That demonstrates growth prospects in the category.On the other hand, if as many as ten new car companies are entering the space, not all can find space in the high-engine segment. Even if they do, cars will have to be a lot more affordable if they are targeting middle-income groups as well. For that, companies will have to localize well and fast. Right now, the locally assembly SUV segment is mostly made of imported content which automatically takes up the price a few notches up. In this context, the most important thing to remember is that automakers must try to capture the depth and vibrancy of the market in order to meet the rising demand that exists for motor vehicles at affordable prices.