Complete Report with Table of Contents. 

The automobile industry in Pakistan lacks stability  due to major transitions from the public sector to the private sector.  In 1980 there were approximately 148,300 vehicles on the road.  The figure almost tripled to 415,500 in 1990.  This figure is further expected to double by the year  2000.



  1. BACKGROUND ———————————————————– 6
  2. PACO —————————————————————————-  6
  4. LOCAL PRODUCTION IN VOLUME ————————————— 8
  5. IMPORT VOLUME ————————————————————- 8


III. DELETION POLICY —————————————————— 8


  1. BAN ON RECONDITIONED CARS ———————————–10


  1. YELLOW CAB SCHEME ———————————————— 10


  1. GOVERNMENT LEVIES ———————————————— 11
  2. LOCAL MANUFACTURERS ————————————————- 12
  3. TAXES ——- ————————————————-  12
  4. TARRIFS ON IMPORTS —————————————– 12
  5. OTHER POLICIES ———————————————- 13


  1. IMPORTS (CBUs) ————————————————————– 13


VII. MOTORCYCLE  INDUSTRY —————————————— 13

  1. GOVERNMENT LEVIES —————————————————— 13
  3. PLAYERS IN THE MARKET ————————————————– 14
  4. FUTURE OUTLOOK ———————————————————– 15
  5. INCREASING MARKET —————————————— 15
  6. EXPORT POTENTIAL ——————————————- 15


VIII. VENDOR  INDUSTRY ————————————————- 15


  1. CAR DEALER SURVEY ————————————————- 16


  1. YEN APPRECIATION —————————————————– 16


  1. EXPORT MARKET ——————————————————– 17





  1. HONDA ATLAS ——————————————————————– 19
  2. NATIONAL MOTORS ————————————————————- 20
  3. ALLWIN ENGINEERING ——————————————————– 22
  4. BELA AUTOMOTIVES ———————————————————– 23
  5. ATLAS BATTERY —————————————————————– 25
  7. HINOPAK ————————————————————————– 27
  8. ATLAS HONDA LIMITED ——————————————————– 28
  9. INDUS MOTORS COMPANY LIMITED —————————————- 30
  10. AGRI AUTOS ———————————————————————— 31
  11. ALLIED MOTORS —————————————————————– 32
  12. PAK SUZUKI ———————————————————————– 33


XIV.  CONCLUSION ———————————————————— 35








The auto industry has an estimated investment of well over Rs.2 billion.  The industry has a market capitalization of Rs. 6.18 billion. It has declined by 51% over the past year as the total market declined by 18%.  The auto industry comprises of 1.5% of the total market capitalization.

The industry  is providing jobs to over 100,00 skilled and unskilled people in the country.  The country is saving almost $1 billion in foreign exchange due to the development of  the auto industry in Pakistan. However the development benefits have not been passed down to the final consumers.


1987 526,254 26,844 75,996 84,746 716,840
1988 575,337 27,805 79,556 94,283 776,981
1989 630,342 29,668 81,533 102,726 844,269
1990 682,636 32,304 84,016 105,205 904,201
1991 731,960 33,235 89,094 107,171 961,460
1992 815,407 39,968 94,337 111,323 1,061,305
1993 863,023 64,755 96,760 112.053 1,136,591



Currently, the  persons per vehicle in  Pakistan are 153. Among major developing countries, the  number of vehicles per person seems to be an inverse function of  per capita income.





COUNTRY                              PERSONS PER VEHICLE                    PER CAPITA INCOME ($)


INDIA                                                               225                                                                  350

CHINA                                                              224                                                                  370

PAKISTAN                                                        153                                                                  420

INDONESIA                                                        67                                                                  610

PHILIPPINES                                                      61                                                                  730

THAILAND                                                         20                                                                1570

MALAYSIA                                                          9                                                                2520







The auto industry may be divided into two categories:–


  1. Heavy Commercial Vehicles:-


The total demand for HCV is approximately 4000 to 5000 units per annum.  The market is growing at a rate of 5% to 6%. Previously, the HCVs were imported. Today there are 4 units involved in  the manufacturing of HCVs.  These vehicles are basically assembled locally.   The  companies engaged in the assembly of  HCVs include:-


  1.   HinoPak
  2. Ghandhara Nissan

                iii. National  Motors

  1. Sindh Engineering


Fully manufactured HCVs are imported in very small numbers.  Their import is restricted for special purposes  such as  armed forces.



  1. Light Commercial Vehicles:-


This category includes cars, pickups, and light trucks.  Until 1992, there were estimated to be 640,000 LCVs in Pakistan comprising of 479,668 cars.  The demand  for LCVs was growing at a rate of 9% which included a growth rate of cars of 12%.  The  current demand for LCVs is 60,000 units which may be divided into three categories.



  1. Locally manufactured cars
  2. Imported cars

                iii. Imported reconditioned cars



Until 1990, Pakistan Suzuki was the only local company engaged in the assembly of cars.  Resultantly, Pakistan  Suzuki enjoyed 80% of the market share.  However, since the early 90s, the number of new Japanese automakers have come into the market such as  Toyota and Honda. As a result, competition in the market is expected to increase considerably.


An overshadowing factor of the Pakistani car market would be the absence of non-Japanese brands on the road.  Suzuki, Toyota, Honda, Mitsubishi, and Mazda collectively dominate the market.  Chevrolet or Peugeot  are still a rare sight. Japanese brands are popular  because of their suitability to Pakistan’s  peculiar characteristics. They have smaller engines than their European  or American counterparts which implies a lower import duty and consequently lower prices ( besides making them more efficient). Japanese cars are also smaller in size making them easily maneuverable in the narrow streets of Pakistan.  However the price advantage enjoyed by the Japanese autos has declined considerably after the 30% depreciation of the rupee versus the yen.


 The auto units are imported for assembly in two forms:-


  1. Completely Built Units(CBUs):-


These  units are in a standing condition and only the  body and other accessories are to be put together.  Buses and Trucks fall in this category.


  1. Completely Knocked Down Units(CKDs):-


These arrive in the form of kits with all parts in loose form.  These kits are then assembled on the assembly lines. Most of the units engaged in the auto sectors are basically engaged in the assembly activity.




General Motors and Sales company were the pioneers of automobile manufacturing in Pakistan.  They started on an experimental basis in 1949. This plant rapidly grew into the source of Bedford trucks and Vauxhall cars, providing the fledging market with its first locally produced automobiles.  Based on the predictable success of General Motors, other American companies also set up three more assembly plants.  In 1963, the Hyesons group set up the first locally managed plant for the assembly of Mack Trucks.  All these plants were however restricted to the semi knocked down assembly operations.


In 1972 came the nationalization, and the government took over the management of  all the auto units through an Economic Reform Order, 1972.  These units were first placed under the control of Board of Industries Management (BIM).




In 1973, the Pakistan Automobile Corporation was founded as a result of the government’s efforts towards organizing a body to promote the industry.  The main idea behind the establishment of PACO were

  • to provide technical and managerial support for the development of an infrastructure for a broad engineering base catering to the automobile industry
  • to enter the export market
  • to generate employment through industrialization
  • to improve technical and managerial skills through local and international programs.


After its inception, PACO conducted a thorough survey of the automobile industry and drew its own recommendations and plans. While these were still in progress, political unrest started, bringing a setback to economic and  industrial growth.  Ultimately in July 1977, the Army took over the control as PACO had to start afresh under the new regime. As a result of reorganization in the structure of corporations under the MOP in 1978-79, the tractor corporation of Pakistan was merged with PACO, thus adding to its responsibilities.


None of the various plants which PACO inherited had the capability to produce automobiles which were competitive according to the international standards.  They were not fully equipped and were short of

many engineering facilities.  There was also the lack of technical know-how because of past policies where a variety of makes and models of vehicles were imported, leaving absolutely no chance for

technicians to develop expertise in a particular make.  Majority of the imports constituted of CBUs, which held back local development of components.   This may be illustrated by the ‘Bedford’ example.


The  Bedford project was sanctioned to M/s. Ghandhara Industries in 1966, with a progressive manufacturing plan to develop 75% parts in Pakistan in five years.  In 1972, ( six years afterwards), when the government took over the venture it was found that only 17% of the parts were developed, although the owners had kept availing the benefits of concessionary rates of duty on the pretext of progressive manufacture at the rate of 15% local deletion per year, with effect from 1966.


In order to meet the local requirements of passenger cars, PACO launched the project of manufacturing Suzuki cars in collaboration with Suzuki Motors Company in Japan.  Suzuki was selected after taking into consideration all technical, commercial and economical aspects.  The plant which started  production of Suzuki 800cc car in August 1982 brought a revolution in the local market.


For the transportation of smaller loads of passengers and materials, PACO units have started local assembly of Toyota, Suzuki, Isuzu, and Mazda makes of pickups, coasters, troopers, jeeps , and vans. PACO’s unit of National Motors was transferred to the Habibullah group which was already manufacturing Bedford trucks and buses. It has now achieved 70% deletion.  However, as the demand for heavier trucks and buses has increased, the production of Isuzu and Hino trucks and buses was undertaken by the National Motors and Republic Motors, which were both PACO units.


For Hino products, PACO has already gone into a joint venture with the Hino of Japan and Al-Futtaim of Dubai.  This new company, HinoPak has now come into operation instead of Republic motors. A plant for the manufacturing of diesel engines was sanctioned in 1970, which did not come up until 1972 when the government took over the automobile industry.   It was under PACO’s supervision that this plant known as Bela Engineers started assembly for Bedford diesel engines.


During 1972, the government created a separate ministry called the Ministry of Production which was to be the controlling body of all the nationalized units; the automobile industry was also put under it.  From 1972 to 1980, all the units worked under the control of the  government and the sector enjoyed complete monopoly. All the assembly and distribution rights were under the control of the government.  All policies relating to imports, assembly, sales, and prices ere formulated by the government.


One of  the reasons for the slow growth of the automobile industry has been that up until 1977, the government industrial policy was biased towards the public sector, and as such, the manufacturing activity was reserved for this sector. In the  early 80s, the automobile industry was opened for the private sector operations and Ghandhara Nissan was allowed to take the franchise of Japan trucks, buses, and cars.  Similarly HinoPak was established in the private sector and became the  first joint venture with Hino of Japan.  Suzuki Motor Company was formed, replacing the Awami Autos and Japan was inducted as partners.  Then in  the late 1980s, the government following the global  trend moved for privatization and therefore the auto industry was opened for the private sector.





Currently apart from  PakSuzuki, Indus Motors and  Atlas Honda are assembling CKD units in Pakistan.  Indus produces Toyota Corolla in 2 models while Atlas has come out with 2 Honda models as well. Ghandhara Nissan is planning to introduce Nissan Sunny in mid 1996, whereas the Korean company Kia Motors should go into the market in 1996 as well. Hyundai Motor company of South Korea and Saigol Group of Pakistan have set up a joint venture which will produce 3,000 units in the year 1996. Fiat, Volvo and Mitsubishi are also awaiting for the opportunity to enter our market.



Local production of vehicles increased from 37,869 numbers in 1988-89 to 43,592 numbers in 1993-94, thus showing and average increase of 3% per annum.  Local production of motor vehicles for the last 5 years is given in the following table:


VEHICLES 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94














JEEPS 3,340 1,581 2,805 1,774 1,277 1,565
LCVs 11,899 11,609 11,882 11,641 10,440 11,232
TRUCKS 1,857 1,715 2,029 1,629 2,247 2,250
BUSES 777 626 804 1,114 1,177 1,195
TOTAL 37,869 41,278 42,686 45,069 42,133 43,592








Import of vehicles increased from Rs. 12.2 billion in 1991-92 to Rs. 26 billion in 1992-93, thus showing an increase of 114.4% due to import of yellow cabs.   However, during the year 1993-94 import decreased 37.5% to  Rs. 16.2 billion.  Import of vehicles of the last 5 years is given in the following table;



YEAR VOLUME AMOUNT (Rs. in Mn.) % increase/decrease








1990-91 160,544 10,006 +14.9
1991-92 177,802 12,146 +21.
1992-93 295,350 26,047 +114.4
1993-94 172,355 16,227 -37.7






The main components of the cars are imported as CKD units from or through the respective parent company and their vendors in Japan.  The government however is adamant that the  local vendors be given a share and that a deletion policy be followed whereas locally produced components gradually replace imported ones.  This leads to problems as local vendors cannot provide the quality or the price provided by the Japanese vendors.  They  do not have the benefits of experience or economies of scale.  This is a major reason as to why the quality of local cars its thought to be lower than that of imported ones.  The deletion percentages  achieved by 2 local manufacturers were:-


Pakistan Suzuki        53%

Indus Motors            23%


The level of deletion  attained last year was as  follows:-





MOTOR VEHICLES           47%

MOTORCYCLES                 74%

TRUCKS AND BUSES         50%

TRACTORS                            84%








The deletion  process in the country is slow as the Japanese automakers do not consider it to be necessary. These companies have not been keen to use the local parts as is evident by the following facts.


PakSuzuki, under its initial contract was to achieve a deletion target of 75%  within 7 years.  The company has failed to achieve this target of 75% deletion even after over 10 years and what little deletion has been achieved is not significant in terms of  percentage of imported components.


Toyota and Honda are also purchasing only a very small amount of plastic parts from local vendors.  The reasons given are related to quality and control measures.  The government has been insisting on  75%-100% indigenisation with 5 years in most cases of local assembly production. This level is unattainable from economic as well as technical view point.


Based on the production volumes, technology and support industries locally available, the following indigenisation levels are considered feasible:


Cars         50%            

Commercial vehicles   50%

Motorcycles   50%

Tractors         80%


Fifty percent of  initial deletion consists of basic assembly of CKD components, tires, tubes, batteries, seats, upholstery and  sheet metal components.  However, for indigenisation of high-tech, critical and capital intensive items, such as engine, transmission axle, suspension, die casting, machining, dies, pattern moulds, jigs and fixtures on the average require investment in machinery and tooling of over Rs. 50.00 million on every 1% incremental indigenisation.


The recovery of this huge investment through limited volume of production over a reasonable period is impossible.  This heavy additional cost for low volumes of production would make the finished product very costly as compared to vehicles/parts imported in completely built condition.


The present engineering capability of the country is sufficient to indigenise only upto 50%(net) components of a vehicle.  In order to raise this level, new facilities at high cost are required which are unjustified for low volumes of production.  Indigenisation requirement should be in terms of overall value, rather than specific components.  In case of export of locally-produced vehicles of components, the amount earned annually by the local producers should be added to this level of indigenisation.


In the recent budget it was proposed as follows:-


“ Deletion is being made mandatory industry specific and those achieving  maximum deletion would be allowed concessional duty of 10% at the balance of CKD components.”


Stricter deletion measures begin with a deletion level already achieved in existing assembly plants. This would speed up the pace of deletion, and promote local manufacturers.




Upto 1992, reconditioned cars had a big market with  Daihatsu Charade and Toyota Corolla taking the biggest chunk ( 17,000 and 13,000 respectively). The government had allowed a 50% rebate in customs duty on these vehicles, which lowered their price considerably in comparison with the local manufacturers.  As a result local manufacturers were losing interest.  In order to protect the local industry, the government imposed a ban on reconditioned  cars of two years or older.


The ban was received with a breath of relief by the local manufacturers as previously it was extremely difficult to  compete.  The importers were allowed  a 50% depreciation allowance, which gave them a price advantage ranging from  30% to 40%.  The depreciation allowance was reduced to 25% in the 1993-94 budget and was subsequently abolished.


However, the relief to the local manufacturers after the ban has not come without a cost.  The cost has been borne by the local importers. In 1993, 12,522 cars were imported through which the government earned Rs.1.697 billion.  After the ban, the government has had to dish out Rs. 3.074 billion to cover imports of 12,000 CKDs. The government lost an additional amount of Rs. 1.28 billion due to the illegal entry of vehicles from Dubai and Iran through Quetta. The ban has cost the national exchequer a total of Rs. 6.40 billion.   In the provincial budget of 1995-96, a ban on luxury cars has also been imposed.






In 1992, under the government of Prime Minister Nawaz Sharif, an easy self employment scheme was introduced under which the individuals were to be provided with financing for the acquisitions of taxi cabs and light to medium commercial vehicles. This scheme came to be known as the Yellow Cab Scheme. Under this scheme, an individual needed to make a down payment and he would be entitled to a 90% loan from a nationalized bank. The loan was obtainable at a rate of 15% p.a. with no collateral. The repayment was to be made on an installment of 60 monthly payments. Under this scheme, 20,000 new vehicles were added to the fleet of taxi cabs in Pakistan.





On Oct. 15,1993, the government announced that the transport revamping scheme had been scrapped.  The vehicles on the docks could only be cleared from customs after paying a concessionary customs duty at the following rates:-


Cars upto 1800 cc                                    75%

                Cars above 1800cc                                  90%

                Buses, trucks,pickups,and coasters           50%


 Apart from these customs rate, the clearance would require payment of demurrage, iqra, and surcharge.  After clearance, these vehicles could be exported at concessionary duty rates.  Because major importers refused to comply with these proposals, a case was filed in the Supreme Court of Pakistan for the revival of transport revival scheme. The result of the case was a compromise formula agreed upon by the government and dealers,  which was put before the Prime Minister for approval.



CARS UPTO:-                                                                  CUSTOMS DUTY:-

1000 cc                                                                                              10%

1000-1300 cc                                                                                 20%

1300-1600 cc                                                                                 25%

1600-1800 cc                                                                                 30%

1800-2000 cc                                                                                 35%

greater than 2000cc                                                          40%

                                    commercial vehicles in CBU condition                                  75%                                                                                                   

                                    commercial vehicles in CKD condition  importer

                                     under Lcs established upto July 26,1993                                5%



The dealers would  have to clear all bank dues and markup, demurrage and other port charges. These could be included in the sales price in the open market.


Once  the vehicles held up were allowed in the market, there was an oversupply causing problems for the local assemblers who had imported vehicles in CKD condition. Many  cars under the Prime Minister’s Scheme remain unsold due to the following reasons:-


  • Narrow margins between the prices of locally manufactured cars or imported vehicles.
  • These vehicles are not accepted readily as they are repainted
  • Many such vehicles are lying at the ports leading to the deterioration of condition
  • Spare parts are not readily available.



The truck and bus industry has been affected more severely as compared to cars. The major assemblers (Hino and Ghandhara Nissan)  have been weakened as they committed vehicles (CKD and CBU) with their foreign suppliers in anticipation of increased orders under the Prime Minister’s scheme. These vehicles have now added to their inventory. These additional vehicles attract normal custom duty of 30% and other charges. To make matters worse, the government has imposed a 15% sales tax on those vehicles.  The net result has been a slowdown in the sales due to sales tax and saturated demand due to the Prime Minister’s vehicles scheme. Due to falling sales, stagnant cost of sales, rising financial charges,  inventory carrying costs, and selling and administrative expenses, the profits of most local manufacturers suffered.


A total of 60,000 vehicles were brought in through this scheme. Out of this, a total of 19,000 awaited clearance as end of last year.  As of 30.3.95, 10,737 cars are still with Pakistan customs, and the rest are with dealers.  The banks have funds of over Rs. 5 billion tied up in these vehicles. A classification of the 10,737 vehicles pending for disposal is as given.


 VEHICLES                         VOLUME


Taxis                                        7862

Pickups                                      72

Vans                        1943

Coasters                                     377

Buses                         152

Trucks                                       331


To compensate local manufacturers for the saturation brought about by these cars, the government framed a relief package comprising of the following points


  • Concessionary Customs duty on CKD kits of  22%.  (Commercial duty: 65%).
  • 25% depreciation allowance on used cars was removed
  • Import of cars 2 years and older was removed



The government has recently decided to dispose uncleared vehicles imported under the yellow cab scheme to the serving and retired government servants ( both civil and armed forces). These officers will be served on a first come first served basis and not more than 1 vehicle per family will be disposed of payment of full cost.  This decision was taken by the ECC cabinet and is being processed by the Ministry of Commerce.






The auto industry has desperately been seeking a government umbrella, with special emphasis regarding protection for the local manufacturers.  The government response has been the exact opposite, as the industry is subjected to volatile government regulations, as is evident from sanctions issued and withdrawn one after the other.





Taxes (Sales and Direct)


After a very volatile policy of changing the sales tax on local manufacturers a number of times, the government has finally settled on the withdrawal of sales tax on new plants and BMR, which has indeed brought a sigh of relief. However, the sales tax on currently producing local manufacturers persists at 15%, which the local manufacturers still considers a heavy penalty.  This policy has remained one of the most controversial government levies.


Tariffs on imports (on CKDs)


Custom Duty on CKD was expected to go up from 22% to 30% from July 1995, but the concessional rate of 22% on CKD kits of passenger cars has been retained for another one year. CKD kits for diesel passenger cars will also be entitled to this concession.  This strikes as a major protectionary step from the government.


 Other Policies


For modernization and replacement the government offers use of zero rated tariffs for raw material and component, accelerated rated of depreciation at 25% for the first 2 years, and reduced withholding tax for components and raw materials.    (NEW ENGINEERING POLICY).


  1. IMPORTS (CBUs).

On the other hand, duties on imports has been cut down, which removes to a large extent the protection level enjoyed by local manufacturers.



DUTIES                                                CKD                        CBU


CUSTOMS  DUTY                  22%                         60%

SALES   TAX                                          15%                         15%

OCTROI                                  2%                           2%



              CUSTOMS DUTY.



This section of the auto industry, saw a decline of 30% in sales at 71,696 motorcycles in 1994 as against 102,004 during ‘93  The average sale in Karachi was approximately 1500 units per month, but now it has shrunk to just 200 units.   Both, adverse government levies and the worsening law and order situation, can be sighted as the two major reasons, other reasons being rise inflation, labour charges, electricity and conservancy rates.  Yen appreciation adds to the problems, and is infact the most heavy blow to the industry.  As a result, costs have increased  by an average of 40%.



Imposition of 15% sales tax on retail  prices  (reimposed in the last budget 94-95), is considered a heavy ‘penalty’ on the industry.  All efforts have failed to lower or abolish this adverse and most fatal levy of the government.  Secondly, import duty structure of 105%  on CBUs lays a great strain on the cost of goods.  Import tariffs on all items have been reduced to a maximum of 65% according to the conditionalities of IMF, but motorcycles have not been considered.  A reduction from 105% to 55% is recommended.   Thirdly,  the restructuring of withholding tax has also been countered by the increase in the net percentage.  Previously, withholding tax was deducted on the commercial duty of 65% on CKDs, and not on the concessionary duty of 20% which is the actual duty paid.  In the 95-96 budget, payment of withholding tax is restructured, and now tax is paid only on the concessionary duty, which amounts to the actual tax liability payable.  But, the rate of withholding tax is increased from 2% to 4%, and the importer does not avail any net benefit.


The only favourable government protection is the reduction of customs duty on CKDs, from  25% to 20%.  But the continuing yen appreciation again dampens the favourable impact this policy might have initiated.

POST BUDGET       95-96                       PRE-BUDGET


Customs Duty on CBUs           105%                                                       105%

Customs Duty on CKDs          20%                                                        25%

Withholding Tax                      4%  (when considering concess-                  2% (when considering

ionary duty – leading to payment                   commercial duty)

of actual tax liability)




In most of the Far Eastern countries, especially in Japan, Korea and Hong Kong, consumers usually use motorcycles for 3 year, after which major components of the motorcycle have to be changed (under their law).  But most of the consumers prefer to dump their vehicles, due to the cumbersome procedure and price hike of spare parts.  These motorbikes then cater to the large market of reconditioned motorcycles to countries like ours, where new vehicles are very expensive.


Our government has imposed a ban on these vehicles, as a major step towards protection to the local manufacturers, but  instead of any favourable impact, the policy has hurt the industry.  Prices of locally manufactured bikes accelerated, resulting in a major decrease in sale.  Thus we see the motorcycle industry trapped in a vicious circle.

If import of reconditioned cycles is allowed, the price structure would be – Import value of Rs. 8,000, and total cost after paying 105% duty and 15% sales tax amounts to Rs. 22,000.  After the profit margin, a reconditioned motorcycles can be marketed for Rs. 25,000, against the present price of Rs. 48,000 to Rs. 60,000 for new vehicles.  (Business Recorder March 19,1995).

Adverse government levies  have led the prices to accelerate and they have registered an increase of 40%.

Jan 94                                      Dec 94                     Latest price (June 95)

HONDA CD 70                        30,000                                     48,000                     50,800

HONDA CG 125      47,700                                     57,500                     61,400

SUZUKI 100 CC      30,000                                     47,000                —

YAMAHA 100 CC                   32,000                                     55,000                —





HONDA   57%

YAMAHA               33%


IMPORTS                03%


Atlas Honda, the market leader, has increased its market share from 57%  last year to 58%.  Yamaha (33% market share) has its producing plant in Punjab, and has captured the market of the major cash crop regions.    Agriauto, in collaboration with Ege ‘Mosa of Turkey, is offering the Automac version at the following prices:


50 CC                      Rs. 23000 – Rs 26,000

70 CC                      Rs. 27,000 – Rs. 31,000



There are two major foreign joint ventures which are expected to enter the Pakistani market within the next 6 months.  (Chinese Companies joint ventures are worth over $5 million).  The major objective would be to offer motorcycle at a cheaper price to the Pakistani middle income consumer.  Both the groups have claimed that their products would cost 30 to 40% less than the existing prices.  These groups are

  • Kohinoor Group, to sign a Joint Venture agreement with China Qingqi Motor Company General Corporation.
  • Sohrab, Joint Venture with Nanjng Jincheng Machinery Company Ltd.

 — (Business Record May 19, 1995).



Offer of light engine, cheaper brands are not expected to eat up the market shares of the existing market players.  These new venturists offer their goods to the economy class, which was not included in the existing target market.  Hence these new brands will increase the pie, instead of eating up others’ shares.




Local manufacturers are now turning to the export of the goods, which Atlas Honda to start their export of their vehicles to Bangladesh.  (Monthly exports of 200 units).






Automobile industry generates 10% revenue in the industrialized world which not only helps in industrialization, but also provides mass employment to the people.  An automobile has over 2000 components and parts and the market assemblers are usually able to produce only a small number of critical parts whereas a majority of the parts are manufactured and supplied by ancillary industry, sub-contracting and vendor industry.


Today, the private sector is able to manufacture 40% to 50% parts locally. There are few who have attained deletion of upto even 60%.  The private sector claims that if fiscal anomalies are rectified, they can achieve deletion of upto 75%.  The domestic component manufacturing industry, however, is still in  the process of development and therefore 40% of the domestic requirement of auto parts is met through imports.  These components are imported from Japan, U.K., Italy, USA, and Germany.


The are some 160 auto parts manufacturing units in the organized and unorganized sectors.  They are mostly situated in Punjab and  Sindh with a total installed capacity worth  Rs. 18 billion per annum.  At present the major manufacturing units are Allwin Engineering, Balochistan Wheels, Landhi Engineering, and  Pakistan Machine Tool Factory.  The ancillary industry is manufacturing small parts and non-automotive items and has established its base in Pakistan.  In the large manufacturing PMTF  is manufacturing quality gear box, axles for tractors and cars. RCD Ball-Bearing is manufacturing certain ball bearing for automobiles.  Balochistan Wheels have performed outstandingly in the manufacture of automobile wheels, meeting 90% of the local market requirements. They have even exported their wheels to the UK. Similarly in the two wheeler and three wheeler, Atlas Honda and Khawaja Autocars have achieved one of the highest deletions.


 However, the local vendor industry has seen bad days, and some of the reasons for damp sales recorded in the recent past are as follows:-


  • Locally produced parts go through a lengthy process of inspection taking about 1 to 2 years, which enhances financial costs.
  • Lack of high tech knowledge
  • Small consumer market
  • High tariff structure on imported raw materials; sales tax @ 15% and direct taxes @ 50%
  • Increased price of utilities and less productive labour


Apart from the above mentioned reasons, the vendor industry is also affected by the smuggling of car parts under the cover of Afghan Transit Trade, which is currently the main source of supply parts in the replacement market.




Worst hit by the yellow cab fiasco, many car dealers are trying to dispose off the yellow cabs standing on port.  Imports have almost been negligible.  Prices of the cars, when released from the port, rise due to the mark up charges on Lcs, (delayed the release, higher these charges), and storing and other expenses.  They are also subject to a 5% Capital Value Tax on registration.  For these reason, almost all dealers have been operating in losses, with major dealers having suffered losses to the tune of Rs 40 to 50 million.


With about half  the yellow cabs now sold and the dealers hoping that the rest will be cleared within a year, ‘96 will shift the dealers business to locally manufactured cars.  In this respect, they are faced with the same risk of market saturation, where all auto makers compete for each others market share.  With deteriorating environment and stagnant economy, absorption of these expensive cars just adds to their problems.



Historically CKD costs have come to approximately 50% of the total manufacturing costs.  With time these will rise.  As most of the companies import CKD kits from Japan, the appreciation of the yen leads to and appreciation of their costs.  However, automakers cannot always increase prices in proportions to the rupee falls.


The yen has appreciated by 17% annually from 1992 to the current year, 1995.  The car prices have risen by almost the same percentage nearly.  However most of the price increases came about in 1994-95 after the price controls were removed. The auto industry suffers from extreme sensitivity to yen price movements which play an important role in determining car profits.

An example would be that of  Pak Suzuki.  A 1% increase in the yen rate leads to a 23% decline in the profitability of the company.  Another case is that of  Indus Motors.  The company suffered a loss of Rs.26.596 million in 1994 as compared to a profit of Rs. 88.097million in 1993.  The main reason for this dilemma was the yen appreciation.  Toyota has a deletion figure of 24%.  This implies that 76%  of the parts are imported from Japan.  Hence the yen appreciation led  to a major inflation in  its costs.



Pakistan has an annual demand of 60,000 units per annum in the auto sector. As against this, the local assembly sector  has a capacity to produce 140,000 units. The duty benefits offered to the importers have also hit the local manufacturers hard.  The local market players are now looking  beyond the local market.

Indus Motors Co. recently made its debut in the export market by exporting two locally manufactured Toyota cars to Dubai.  This export market forms a new horizon for the local manufacturers who have not been very satisfied with the local market.

As far as the auto parts manufactures are concerned, Pakistan has immense export potentials. A look at the international scenario proves this point. A huge scope for auto parts may be witnessed.  The market for auto parts abroad is worth more than Rs.100.00 billion.  Since our local market is near its saturation point, hence we must venture abroad.


                                                                                                STANDARD MODEL                WITH AC


ALTO (MEHRAN) -MARKET PRICE                                     237,000                                   261,000

ALTO (MEHRAN)-FACTORY PRICE                     213,000                                   238,000

SWIFT(KHYBER)-MARKET PRICE                                       314,000                                   364,000

SWIFT(KHYBER)-FACTORY PRICE                                      279,000                                   314,000

SWIFT(MARGALLA)-1300CC-MARKET PRICE   407,000                                   462,000

SWIFT(MARGALLA)-1300cc-FACTORY PRICE   375,000                                   413,000

JEEP(POTOHAR)-MARKET PRICE                                        560,000                                   590,000

JEEP(POTOHAR)-FACTORY PRICE                                      382,000                                   422,000



COROLLA XE A/C-POWER STEERING                    —                                         620,000

COROLLA GL MODEL ‘95 PAK.(SOLID COLOUR)                —                                         750,000

COROLLA GL MODEL ‘95(METALLIC COLOUR)                                                               765,000

COROLLA GLi(SOLID COLOUR)                                                                                          865,000

COROLLA GLi(METALLIC COLOUR)                                                                  859,000

CORONA                                                                                                                 1900,000

LANDCRUISER 5-DOOR FULLY LOADED                                                                          3,800,000



LANCER EL(NEW SHAPE)’94                                               600,000                                       —

LANCER(SUPER SALOON)’94                                           —                                               950,000

LANCER POWER STEERING                                 600,000                                      —

GALLANT (SUPER SALOON) ‘94                                            —-                                        1,800,000

GALLANT SUPER SALOON-AUTOMATIC ‘94                   —                                             2,000,000


—3 DOOR STD                                                       1,550,000                                  —-

— 3 DOOR SDX                                                       —-                                         1,750,000

VAN STD  MODEL ‘93                                                          625,000                                      —-

VAN DELUXE WITH AC ‘93                                   —          `                               740,000

4×2 SINGLE CABIN                                                               640,000                                     —

4×2 DOUBLE CABIN                                                              770,000                                   800,000



SUNNY DIESEL                                                                         —                                        675,000

PICK-UP(4×2) STD SINGLE CABIN ‘94                                585,000                                     —

PICK-UP(4×2) DOUBLE CABIN ‘94                          —                                        800,000



PICK-UP(4×2) SINGLE CABIN ‘93                                        635,000                                     —-

PICK-UP (4×2) DOUBLE CABIN ‘93                     760,000                                     —



CIVIC EX MODEL ‘94                                                             —-                                         720,000

CIVIC EL MODEL ‘94                                                            565,800                                   607,200

ACCORD 1800 cc                                                       —                                         2,600,000

ACCORD 2000cc                                                       —-                                         2,850,000




C180 MANUAL                                                        —-                                         3,300,000

AUTOMATIC                                                          —                                           3,500,000





The Atlas group started in 1962 with an equity of Rs. 50,000, and today it stands with an equity of Rs. 1.2 billion.  The group has made a significant contribution in the auto and engineering goods industry.

Honda Motor company was formed in 1948. Since then Honda has grown to becoming the world’s largest manufacturer of automobiles and power products. It has a wide global network of 83 production facilities in 40 countries with supplying facilities in 150 countries.

1994 ( in millions)

SALES                                                     1,051.00

COST OF  GOODS SOLD        957.09

GROSS PROFIT                       94.83


FINANCIAL CHARGES                23.73


NET PROFIT                                           20.79



Honda Atlas Cars (Pak) Ltd is a collaboration between Honda and Atlas.  The company has worked in association for over 30 years in motorcycles. The experience gained in its field prompted the company to go for motor cars. Honda signed a joint venture in Pakistan in August,1992. Honda Atlas went into commercial production in 1994.


Due to factors such as the upvaluation of the yen, the deteriorating law and order situation, and the great disarray in the auto industry  due to the release of yellow cabs to be used as private cars, the local auto industry is going through a slump. However due to its quality, and correct pricing strategy, it achieved a high market share. It currently stands at 40%, up from 30%. During five months of actual operations, the company sold 1,946 units, with a turnover of Rs. 1,051.92 million.




1993                        1994

CURRENT RATIO                                   0.19                        0.79

QUICK RATIO                                                       0.13                         0.08

PROFIT MARGIN                                   NA                          0.02

TOTAL ASSET TURNOVER                  NA                          0.78

DEBT / EQUITY                                     0.71                        1.72

RETURN ON ASSETS                                            NA                           0.02

TIMES INTEREST EARNED                  NA                          2.24

ACCOUNTS RECEIVABLE DAYS         NA                          NA

INVENTORY DAYS                                               NA                          230.76

ACCOUNTS PAYABLE DAYS                               NA                          246.27

OPERATING CYCLE                                              NA                          15.51





The company’s liquidity position has strengthened as the company decreased its S/T running finances and term loans.  It has made heavy investment in inventory, but this was necessary as the company commenced commercial production.  The company holds potential growth as is evident by its increasing D/E ratio. The profits also stand at a substantially comfortable limit as compared to the industry averages.  A thorough financial analysis of the company would be difficult as the company started production in 1994. The production capacity of the plant is 5,000 units, while actual production has been of 2384 units.

Honda’s success may be attributed to its productive corporate policies, one being product indigenisation, which enhances adaptability of a product in a particular region. To achieve this in Pakistan, a few cars were tried and tested on all kinds of roads. They were driven for 100 k.m. and were sent back.  After a thorough analyses, many improvements were made to meet the local road conditions.


The first Honda model appeared in July,1994.  Honda Civic Sedan  was  power packed with 16 valves, and 1.5 liter engine. It appeared in four colours.  Another model, the SX, was introduced in December 1994. Two new colours; Sherwood green pearl and Harvard blue appeared in Jan, 1995.


Honda Atlas Cars (Pak) Ltd is Honda’s 14th car plant in the world.  The company is trying to achieve as high an indigenization target as economically possible. The recently announced fiscal incentives by the government are being looked upon favourably by the company. With a promising future the company is ready to face fierce competition in years to come with influx of new car plants.




The company was established in Karachi by General Motors Overseas Distribution of USA.  In 1953, it was renamed as the Ghandhara Industries Ltd by Late General Habibullah Khan Khattak. In 1972, the government of Pakistan nationalized the company and renamed it National Motors. In 1992, M/s Bibojee Services Ltd acquired it under the privatization policy of the government. The major business of the company is progressive manufacture, assembly, and manufacture of Isuzu Trucks and bus chassis.

The major products of the company are as follows:-


  • Isuzu Truck Model FVR
  • Isuzu Truck Model FTR
  • Isuzu Truck Model NPR
  • Isuzu Bus Model MT
  • Bus Body Fabrication




1994        (in millions)             1993


SALES                                                     271.79                                     590.71

COST OF SALES                     280.48                                     567.09

GROSS PROFIT                       (8.69)                                      23.62

OPERATING EXPENSES        27.39                                       26.68

FINANCIAL CHARGES                          101.68                                     43.19

PROFIT BEFORE TAXES       (144.44)                  (41.44)

NET PROFIT                                           (148.93)                  (44.42)



After the Prime Minister’s Scheme for revamping public transport was scrapped, banks refused to extend 90% loan to customs (as had been planned originally). Customers were not in position to make

 90% down payment from cash reserves. This implied that the company was left with large inventory which posed liquidity constraints on already weak financial conditions. After the transport revamping scheme was scrapped, sale of vehicles dropped from 100 per month from May to July 1993 to 20 vehicles a month in Aug and Sep, 1993.



1993          1994


CURRENT RATIO                   0.56            0.51

QUICK RATIO                                        0.14            0.05

PROFIT MARGIN                   (0.57)        (1.80)

TOTAL ASSET TURNOVER  1.06             0.39

RETURN ON ASSETS                             (0.61)        (0.70)

DEBT / EQUITY                     (2.20)        (2.08)

TIMES INTEREST EARNED  0.04          (0.17)

RECEIVABLE DAYS                              3.72          12.60

INVENTORY  DAYS                              129.68    153.61

ACCOUNTS PAYABLE DAYS               168.50       243.21

OPERATING CYCLE                              (35.18)      (22.30)



The financial position of National Motors is not very promising. The declining current and quick ratios show that the company’s liquidity is under a crunch.  The reasons are the slump in the auto industry. The declining profitability was mostly  due to declining sales which resulted due to a large inventory build up under the Prime Minister’s Transport Scheme. Due to fall in sales, the cost of sales went down also. However the selling and administrative expenses remained constant, due to which the operating loss enhanced.  Rising financial charges may be attributed to the increasing running finances. The times interest earned ratio declined as the financial charges enhanced, but operating earnings went down(due to decline in sales without correspondent decrease in administrative expenses).


The company held back on production due to depressed demand.  Because of this inventory built up as is seen by the increased inventory days. The declining total asset turnover shows that there has been a less effective utilization of assets. This was mainly due to the decline in sales. The return on assets has declined as losses accumulate. The  production capacity of the plant is as shown below:-






                                                                Plant  Capacity                     Actual  Production

                                                                1994        1993                        1994       1993

  Truck Bus chassis                   2400        2400                          266        821

4×4 vehicles/pickups                 2400        2400                            —        —



The company needs drastic reduction in administrative and financial expenses. This may be achieved through reduced short term credits. The declining sales may be combated through market repositioning. The company still has to recuperate from the wounds of the yellow cab scheme. The government’s local manufacturer friendly policies announced recently may help. The company has started financial restructuring by giving 580 employees a golden handshake.

A historical analysis of the past 10 years shows that the company’s sales are declining. There  has been a 37% decline from 1985 to 1994. The company has not paid out dividends since 1985. The financial position is weakening as the net working capital is becoming negative. However a note should be made of the fact that the company is old and it possesses assets whose market value must be much higher than the book value shown. Hence the value of the company may be more than the picture visible from the financial.


Allwin produces automotive components for original equipment manufacturers and for the replacement market.  The company belongs to a well established group (Sheerazi) and has been in existence for over 3 decades.


1993        1994    ( in Rs. million)

SALES                                                     285.56     283.18

COST OF SALES                     230.09     230. 34

GROSS SALES                                        55.46       52.85

OPERATING CHARGES         18.86       21.65

FINANCIAL CHARGES                          20.29       21.12

PROFIT BEFORE TAX                            15.49       9.25

NET PROFIT                                           13.84       4.81






1993        1994

CURRENT RATIO   1.03         1.01

QUICK RATIO                        0.37         0.37

PROFIT MARGIN   4.79         1.63


EARNED                 1.80         1.47

RETURN ON ASSETS             0.06         0.02


TURNOVER RATIO                1.28         1.27

DEBT / EQUITY     2.14         1.97

RECEIVABLE DAYS              34.18       47.86

INVENTORY DAYS               115.10     116.15

PAYABLE DAYS    64.68       60.62

OPERATING CYCLE              8.60         103.394


The slump in the car and truck market invariably affected the engineering industry, and Allwin Engineering was no exception.  The abandonment of the government’s transport revamping scheme left automakers with excess vehicle and  hence decreased their current yearly production.  The motorbike production also suffered due to the yen appreciation and price escalation, shifting the demand towards second hand motorbikes.  The tractor industry which was until recently unharmed was also struck by the government’s Awami Tractor Scheme which supposed demand for locally manufactured tractors.  Due to these factors the demand for engineering goods declined.  Sales of the company fell by Rs. 2.00 million to 283.2 million, however the cost of goods sold remained relatively the same, hence the GP showed a 4% decline.  The sales and administrative expenses showed a 15% increase which mainly came from increase in salaries and wages and traveling costs.  The company has undertaken initiative of technical training as the understanding of new technology is extremely important  in this field.   These


increased expenses have cut into the operating profits of the company. The financial charges increased by 4% due to the increase in the short term finances.  At the same time due to the timing differences, the deferred taxes became due. This led to a dampening affect on the profits as shown by the  profit margin ratio.


The assets of the company increased over the years specially due to an increase in the accounts receivable.  The capital work in process also increased from a zero base.  However the increase n the current liabilities was slightly greater due to increase in the short term financing.  An increase in the current assets less inventory was almost the same as the increase in the current liabilities, showing that the company maintained its liquidity position, however it may still be improved. The increase in the receivable from clients is justified by the low sales of the client companies.  This fact  supports the increase in the operating cycle.


The asset base increased, but due to the decrease in sales due to depressed demand, the utilization of assets was not very effective,  As the company gave out a stock dividend, the price rose and the equity base improved.  The total debt declined as the long term loans were paid off.  Resultingly the debt picture improved. The company has the potential and past trends show it has been a strong company. In the  past 6 years the break up value to the share has never gone below par.  The company has been paying out dividends for the past 5 years.   But due to the depressing state of the auto industry is the company showing a lower profits  However, with promising  government policies announced recently, the company has a bright future.


The company has been insisting heavily on  technology and training to update with latest technological trends and at the same time use technology to achieve greater utilization of assets.  Managers and CEOs are attending the programs abroad for this purpose. The company has lost many productive hours due to the  power breakdowns. The company is now going to start self power generation during 1995. With an increase in foreign investment  and foreign companies setting up production facilities automobile goods industry has a potential role to play.




1994        1993     ( in Rs. million)

SALES                                                     35.54       36.76

COST OF SALES                     27.62       29.13

GROSS PROFIT                       7.92         7.62

OPERATING CHARGES         1.26         0.82

FINANCIAL CHARGES                          5.19         6.14

PROFIT BEFORE TAX                            1.73         0.31

PROFIT AFTER TAX                              1.12         0.31


The sales of the company dropped to only 96.67% of the previous year’s sales. The factors affecting the company are the same factors  affecting the entire industry.  The input costs have risen with the appreciation in the yen.  After the yellow cab scheme and the Awami Tractor scheme, the market has a temporary glut. Poor deletion programs and smuggling of auto parts has also  hit the company hard.


1993        1994

CURRENT RATIO   1.65         1.68

QUICK RATIO                        0.59         0.53


TURNOVER RATIO                0.38         0.37

PROFIT MARGIN   0.19         0.06

DEBT / EQUITY     1.66         1.59

RETURN OF ASSETS             0.07         0.02


EARNED                 1.02         1.19


A/C REC DAYS                       158.95     151.65

INV DAYS                              497.76     579.64

A/P DAYS                               25.44       77.48

OPERATING CYCLE              631.27     653.81


The increasing current ratio of the company shows the slight improvement in the liquidity of the company. However the company seems to be investing heavily in inventory as after its elimination, the same ratio (QR) has down.  However increasing inventory highlights the increasing inventory payable days which reflects on the operating cycle.


The utilization of the asset base has dampened as as sales have declined. The profit margin has reduced as profits fall mainly due to the greater amount transference to the general reserve. The D/E ratio has declined showing better debt management. The return on assets has reduced  mainly due to the decreases in returns again because of the great transfer to genera reserve.  The times interest earned ratio has improved due to reduced financial charges as  customers advances reduced, so markup on that subsidizes the bank charges and commission.



Production  Capacity


1993        1994

Actual  capacity                       5,000       5,000

Actual production    3195        3750


Actual production was for only 255 days in 1993, and for 225 days in 1994.



Bela Engineering has promising plans for the future. As financial charges have risen against the PKR and the CNF prices are no longer workable for the automotives industry.  This has given the industry a chance to get back to self reliance. Bela has also worked possibilities of exporting high tech components to Western Europe and USA.  This indeed brightens the future prospect of the company.



The company was incorporated as a public limited company on Oct 19,1966. Its engaged in the manufacture and sale of automotive and motorcycle batteries.


1993                        1994        ( in Rs. million)

SALES                                                     260.41                     206.35

COST OF SALES                     193.57                     141.60

GROSS PROFIT                       66.85                       64.75

OPERATING EXPENSES        34.63                       36.38

FINANCIAL CHARGES                          9.80                         12.79

PROFITS BEFORE TAXES     23.89                       23.12

NET PROFITS                                         15.84                       7.65



1993                        1994

CURRENT RATIO                   1.16                         1.27

QUICK RATIO                                        0.42                         0.48

PROFIT MARGIN                   0.04                         0.06

RETURN ON ASSETS                             0.07                         0.12

TOTAL ASSET TURNOVER  1.73                         1.94

DEBT / EQUITY                     2.95                         2.23

TIMES INTEREST EARNED  2.84                         3.53


A/C RECEIVABLE DAYS       14.28                       14.83

INVENTORY DAYS                               128.93                     105.97

A/C PAYABLE DAYS                             84.05                       66.39

OPERATING CYCLE                              59.16                       54.46


The company has been going through a depressed phase as the auto industry is facing a business trough. The company’s debt position seems to be improving even as the company acquired long term loans and short term financing to meet funding requirements. The company’s equity base enhanced and certain loans such as redeemable capital came down. The company’s provision for taxation also dropped.  The company’s return on assets also improved as profits increased despite slump in the auto manufacturing industry.  The company  had good control over its administration costs; even though selling expenses rose but still profit before taxes are good as the financial costs went down.  This was achieved as the interest on debentures declined to 25% of that of 1993, redeemable capital reduced by 20%, and morahaba financing decreased by 28%.  The taxes also fell thus contributing to the profits.


Even though assets increased by 12% yet profit enhanced by 93.98%. Thus ROA showed an improvement.  Sales improved but control over costs led to a higher raise in profits accounted for by the PM ratio.  Asset utilization improved, and this shows  that the company is trying to decipher methods of better utilization.  For this purpose, the company has held several training programs abroad.  The company belongs to the Atlas group which has a policy of creating awareness in order to enhance efficiency. The times interest earned ratio has improved due to similar reasons; the financial charges came down due to a decrease in redeemable capital, long term loans, and morahaba financing.  Due to an increase in the selling expenses and increased cost of sales, the operating profits suffered. This however was somewhat salvaged by the decline in administrative costs.

Improved current and quick ratios indicate better liquidity as current assets increase with increased investment in inventory, trade debts, and cash balances. Current liabilities increased, but by a lesser extent due to a decline in the current maturity of  long term debt and provisions. Hence the company is liquid.  The operating ratios have declined proving that the company has improved its position.  This has mainly been achieved thorough decrease in inventory days, which imply reduced carrying costs.


The company on the whole has good future prospects.  The recently announced government policies are seen favourably.  Human resource training is being emphasized upon.  The company has worked out a better marketing program , which has increased its raw material costs , but this is being combated by economizing of battery plates, and improved battery capacity.  All these features add to the potential prospects of the company.





Ghandhara  Nissan Diesel Limited belongs to the prestigious Gen (retd) Habibullah group.  It was formed in Feb, 1985.  It began as a joint venture between  Ghandhara Nissan private limited, Nissan of  Japan, and Toyoa Menka Kaisha limited of Japan.  It was listed on the KSE in 1990.  GNDL is involved in the assembly and progressive manufacture of  Nissan trucks and buses.  GNDL has an agreement of technical assistance with Nissan Diesel Motor company of Japan, with which it assembles vehicles under the brand name of Nissan and its parts.


1993        1992    (In million)

SALES                                                     974.7       756.3

COST OF SALES                     886.7       681.9

GROSS MARGIN                    92.6         77.3

OPERATING EXPENSES        28.6         22.7

FINANCIAL CHARGES                          29.3         10.6

PROFIT BEFORE TAXES       24.4         33.5

NET PROFIT                                           10.5         19.4


GNDL has a capacity of 2,400 trucks.  It has a product mix of 5 models of trucks and 2 models of buses. It assembles trucks of 7 tones, 10 tones, and greater than 10 tones.



1993        1992

CURRENT RATIO                   0.93         1.12

QUICK RATIO                                        0.25         0.38

PROFIT MARGIN                   0.01         0.02

RETURN ON ASSETS                             0.01         0.05

TOTAL ASSET T/O                                1.09         2.08

DEBT / EQUITY                     7.95         3.08

TIMES INTEREST EARNED  2.18         5.15

RECEIVABLE DAYS                              24.72       5.98

INVENTORY DAYS                               252.9       103.61

PAYABLE DAYS                    119          10

OPERATING CYCLE                              158.62     98.59


The company’s current liabilities have risen mainly due to the increase in the bills payable under import of Lcs.   Current liabilities have also pumped up due to the increase in S/T borrowings to finance the heavy inventory build up. The total rise in CL over 1992 has been of 3 times while CA have risen by 2.79 times.  This accounts for the fall in the  current ratio. The  company has heavy investment in inventory as is proved by the quick ratio. The fall of the quick ratio has been of a  lesser extent(65%) as compared to the fall in the CR(83%).  Assets have risen by 245%, mainly due to the increase in inventory.  However

 the asset utilization  was not visible as the incline in sales was only by 128%.  The company’s capital increased by 125%.  Long term funds declined by 23.75% and the long term debts from the banks were retired.  However  short term debts rose by 801.53% leading to and increase in leverage.

The financial charges enhanced due to the increase in the short term funds. This dampened the times interest earned ratio. The company’s receivable days increased as rising sales brought about a 532% rise in trade debts.  The inventory days also rose as the company made heavy investment in inventory.  The net impact was a longer operating cycle showing higher time for realization of cash.  The company is admist a tight position from the liquidity position.



The main functions of the company are manufacturing and assembly of Hino vehicles in Pakistan (buses and trucks). HinoPak limited is a joint venture between Hino motors, Toyota Tsusho Corporation of Japan, Al Futtaim group of UAE and  PACO.  The breakup of the shareholding is given below:-

Hino Motors                                                            4.5%

Toyota Tsusho Corporation of Japan       4.5%

Al-Futtaim (UAE)                                    40%

PACO                                                                      40%

HinoPak imports CKD units and spares from Hino Motors, Japan through Toyota Tsusho Corporation.  CKD imports are made on the basis of confirmed contracts.

HinoPak works with a network of 14 dealers spread all over the country. All assembled chassis are delivered to the dealers.  The purpose of this is to control prices and ensure that no vehicle is sold over the prices fixed by HinoPak.  The company has 120 vendors producing 900 different components for HinoPak vehicles.





1993                        1994

SALES                                                     1,199,906                548,432

COST OF SALES                     1,094,514                527,981

GROSS PROFIT                       105,392                   20,451

OPERATING CHARGES         36,239                     29,706

FINANCIAL CHARGES                          27,183                     20,737

NET PROFIT                                           33,693                     (26,431)


Sales  of the company are through  a network of 26 service dealers and 35 spare parts dealers spread all over the country.  Sales  of the company declined  in 1994 due to the suspension of transport revamping scheme.  Sales also suffered  due to the imposition of a sales tax of 15% in October 1993.   Cost of sales of  the company increased with the appreciation of the yen.  The company was able to make a profit before tax due to reduced administration expenses.   However the financial expenses of the company rose by 4.5 times over those of 1993.  This was due to the increased borrowings taken to finance the carrying costs of inventory.



CURRENT RATIO                   1.25         1.06

QUICK RATIO                                        0.12         0.18

RETURN ON ASSETS                             0.02         (0.02)

TOTAL ASSET TURNOVER  0.81         0.32

PROFIT MARGIN                   0.03         (0.05)

DEBT / EQUITY                     2.39         4.42

TIMES INTEREST EARNED  2.69         (0.283)


RECIEVABLE  DAYS                             7.08         16.59

INVENTORY DAYS                               386.67     834.54

PAYABLE  DAYS                   209.81     653.0

OPERATING CYCLE                              183.94     198.08


The current  ratio reduced due to the increase in S/T debt taken to finance inventory.  The liability of leased assets  were maturing this year so that is why current liabilities enhanced and this led to the fall in current ratio.  The profits of the company suffered mainly due to the fact that the sales dropped heavily but this fall was not matched by a proportionate fall in the cost of sales.  Even though operating charges fell in comparison to the costs of the previous year, yet the gross profit was not sufficient to meet the burden, and hence the operating profits fell.  This fact is portrayed in the negative profitability ratios.


Hino Pak has the largest market share of trucks and buses.  With  the declining law and order situation in the country, and decreased number of working days, the transport of materials from one place to another is slowing down.  This has also contributed to the lower sales of the company.  However, with a strong backup from its parent company, HinoPak is in a better position to take its current losses as compared to its competitors.  Thus the company has brighter prospects in comparison to others in the group.




Operating since 1962, Atlas Honda is an important member of Atlas Group contributing 61% to the total group sales.  Honda Motors and BOT International holds 23.23% of their shares and the CEO and Chairman are from the Shirazi family.  Atlas Honda’s main business is progressive manufacture and sale of motorcyles.  They enjoy a 56% market share (increased from 53% last year) , but the sale of Honda motorcycles has registered a decline from 61,000 units in 93-94 to 49,000 units in 94-95.


94                             93         (Rs mn)


SALES                                                     1,836.5                    1,940.3

COST OF GOODS                                   1,628.9                    1,757.8

GROSS MARGIN                    214.3                         192.1

OPERATING EXPENSE          83.8                            74.7

FINANCIAL CHARGES          76.1                            61.8

PROFITS BEFORE TAX          18.7            17.8

NET PROFITS                                         11.4                            13.4



RATIOS                                   94                            93


CURRENT ASSETS                 1.04                         1.05

QUICK RATIO                                        0.21                         0.13

LEVERAGE                                            2.57                         3.25

TIMES INTEREST EARNED  1                              1


PROFIT MARGIN                   0.6%                        0.6%

RETURN ON ASSET                               1.%                          1.57%


DAYS RECEIVABLE                              3                              1

DAYS INVENTORY                               61                            69

DAYS PAYABLES                  6                              16


The size of the balance sheet decreased by 11.2%, i.e. by Rs 95.3 bn,  and shows a decline in most of the accounts.  The company, which faces undercapitalization, has been acquiring heavy long term loans from:


–  TFC NIT:  Rs. 50 mn    (early 93).        Current balance :Rs. 35.918 mn.

–  NDFC   :  Rs. 70 mn     (May 92).        Current balance :Rs. 39.2 mn.

–  Deusche Bank: Rs. 20 mn  (Sept 92)  Currrent balance  :Rs. 3.25 mn.

–  The company also engages in finance leasing.


The reducing debt shows the payment of these long term loans which reduced  from Rs. 133 mn  in ‘93 to Rs 93 mn in ‘94.  On the current side, the company has reduced short term liabilities to match the reducing short term assets.  The company has reduced its trade payables by Rs. 45.4 bn (62%) and deposits and advances received by Rs. 30 bn (40.4%), cutting down its current liabilities by 13%.  This matches the cut down in current assets by 14% ( in raw material, and another account ‘income deducted at source’).  Thus, its working capital has been favourable with a current ratio of 1.04.  Since 76% of its current assets are formed by the inventory,  so the quick ratio is only 0.207.  This indeed mars its liquidity position.  Its interest coverage has not improved since the last 3 years, and remains at 1.  Operating cycle of 58 days  (up from 54 days) shows a slight incline in realization of cash.


Atlas Honda is operating at a very low profit margin of 0.6% during the last two year, before which there were negative returns (in ‘92).  Return on equity is again shaking, falling to 5% (from 7% last year).


We see Atlas Honda amidst a very competitive market with its motorcycles getting even more expensive.  However, the management believes that the cheaper brands, which were introduced this year, and other motorbikes to be launched within 6 months will create a separate target market, and their own target market will not shrink.  Still, the price appreciation has caused shrinking sales.   Current prices are:


7th June ‘95             31st May ‘95

CD 7O                   Rs.  50,800              Rs.  50,000     (last price revision).

CG 125                  Rs. 61,400               Rs.  60,400      (  – do –   )


The positive aspect Atlas Honda is enjoying is the acquisition of export rights of Honda motorcycles to Bangladesh, Central Asian countries, Nepal and Sri Lanka.  Atlas hopes that out of  80,000 motorcycle production,  it will be able to export 20 to 30%.  Exports are scheduled to start from August ‘95, with a monthly installment of 200 units.




Indus Motors, a joint venture of House of Habib, Toyota Motor Corp. and Toyota Tsusho Corp., was incorporated in Dec 1989.  It is the sole distributor of Toyota vehicles in Pakistan, since July 1990.  It started commercial production from May 1993, and progressive manufacture was added to its task of import and marketing operation.


94                            93     (Rs.  mn)


SALES                                                     4,722.19  4,307.2

COST OF GOODS                   4,397.5                    4,012.4

GROSS MARGIN                    324.6                      294.8

OPERATING EXPENSES        113.87                     117.46

FINANCIAL CHARGES                          77.94                   12.27

PROFITS BEFORE TAX          149.7                       167.05

NET INCOME                                          121.5                   84.47




RATIOS                   94                            93


CURRENT RATIO   1.44                         1.12

QUICK RATIO                        0.68                         0.51

LEVERAGE                            0.89                         1.87

INTEREST COV.     1.92                         13.62

ASSET TURNOVER                2.04                         1.24

PROFIT MARGIN   2.51%                      1.96%

RETURN ON ASSETS             5.25%                      2.44%


DAYS RECEIVABLE              7.49                         2.53

DAYS INVENTORY               48.74                       108.76

DAYS PAYABLE    50.49                       171.4


Sales increased by 9.6% (from RS. 4.3 bn to Rs. 4.7 bn), though it sold 9440 cars in 93 – 94, as compared to 11034 cars in 92-93.  Indus produced 4611 units, while its capacity stands at 20,000, and so utilized 23% of its capacity.  This capacity under utilization is attributed to lower demand.  Sales figures are:


94                            93                            92                            91

VOLUME                                9440                        11034                      8440                        7189


RUPEES                                  4722.19                   4307.28                   1917.18                   1045.48



Indus now maintains a 47:53 debt to equity proportion.  Its equity slightly increased due to increase in reserves.  Long term finance saw an increase of 8.7%, when Indus secured a loan of Rs. 100 mn under the Locally Manufactured Machinery (LMM) Scheme.  As against facility of Rs. 647 mn for short term running finance, the company shows a balance of Rs 7.77 mn in 1994.  (There has been an increase in the facility, and decrease in the actual balance).  Earning now covers its financial charges only 1.92 times, as against 13.62 times in 1993.  (Financial charges increased to Rs 77.9 mn from Rs. 12.27 mn).   There has been a major reduction in short term liabilities.  Their advances from customers and dealers have gone down by Rs. 805 mn, while their advances against Public Transport Scheme has been wiped off, from a balance of RS. 352 mn last year.  Current assets have shown a decline in their inventory balance by 50.8% and cash and bank balances, by 67.8%.  Liquidity has thus shown an improvement in both current ratio and quick ratio, which stands at 1.44 and 0.68.  (last year: 1.12 and 0.51 respectively).   A narrow profit margin of 1..9% in ‘93, showed and improvement to 2.55 in ‘94.  Return on assets and equity have both shown an improvement.


Hostile market conditions have led Indus to produce at just 23% of its capacity and decrease its balance sheet size by 33%, while sales in units has shown a decline by  14%.  The major problem was the negligible imports during 93 and 94, when imported yellow cabs standing on ports replaced other imports.  For locally produced cars it offers;


Toyota Corolla GL  Metallic colour       Rs. 753,000

“         “         “       Plain colour          Rs. 743,000

“         “         Gli   Metallic colour     Rs. 859,000

“         “          “      Plain colour          Rs. 849,000

“         “         XE    A/C                         Rs. 599,000







Incorporated in June 1981, and listed on K.S.E.  in June 84, Agriautos has a diverse range of activity, manufacturing automotive vehicles, motorcycles and agricultural tractors.  It also included manufacture of auto parts since June ‘88.


94                            93                 (Rs. Mn)

SALES                                                     248.18                     289.9

COST OF SALES                     205.18                    233.5

GROSS PROFITS                     42.9                         56.34

OPERATING EXPENSE          26.85                       39.8

FINANCIAL CHARGES                          24.12                       23.8

PROFITS BEFORE TAX           3.017     16.86

NET INCOME                                         1.73        15.43


RATIOS                  94                            93


CURRENT RATIO                   1.012                       1.05

QUICK RATIO                                        0.36                         0.48

LEVERAGE                                            1.61                         1.65

INTEREST COVER                 0.112                       0.42

ASSET TURNOVER                                0.79                         0.92

PROFIT MARGIN                   0.7%                        5.81%

RETURN ON ASSETS                             0.55%                      0.05%


DAYS RECEIVABLE                              69.3%                      69.87%

DAYS INVENTORY                               190.88                     151.85

DAYS PAYABLES                  128.43                     93.1


Agriautos provides auto parts to other local manufacturers like AlGhazi Tractors Ltd., Millat Tractors Ltd, Pak Suzuki Co., while its self-manufactured vehicles are sold through its dealers.  Due to the slump in the industry in 93 and 94, agriautos experienced a sales decline of 14%, from Rs. 289.9 mn in 93 to Rs. 248.16 mn in 94.  Export sales and sales for replacement parts showed an improvement, while sales of the tractor industry and sales of Original Equipment Manufacturers (OEM) underwent a drastic cut back.


The company maintained an appropriate leverage balance.  (Debt slightly decreased from 62.3% to 61.7%).  Agriautos finances its operations from:


– issuing Term Finance Certificates for sales-cum-investment agreements with  Invest. Corp.  Of Pakistan (July 1990).   Current Balance Rs. 4.2 mn.  Other TFCs matured this year.

– after maturity of the loans from Habib Bank, long term loan are now obtained from National Bank.  (Demand Finance of Rs. 15 mn.).

– finance lease of Rs. 7.8 mn current balance.

– rights issue was in proceeding to finance its capital investments.


Running finance was slashed from Rs. 78 mn from Rs. 60 mn (23%), and this matched the decrease in receivable (15%) on the current assets side.  Inventory position showed an increase of 10.4% from Rs. 97 mn to Rs. 107 mn.  Advance/Refundable tax  was Rs. 0.8 mn as against Rs. 12.88 mn last year.  Company paid a turnover tax of 0.5% this year.




Allied Motors Ltd., formerly Allied Tractors Ltd., is a public Ltd. Co., (incorporated in May 1982).  It is  engaged in the assembly-cum-progressive manufacture and sale of Tractors, ( commercial production commencing in 1983), and in trading of parts.  The change of name took place in June ‘94, as the company now intends to include Farm Machinery and other automotive products in the line of business. An agreement was signed with Chinese manufacturers of 3 wheeler Farm Vehicle, under which CKD units will be shipped (20 units were to be shipped in Jan ‘95).


Cost of goods sold for Allied  was 82% of sales in 1994 as against 80% last year.  Yen appreciation could be sighted as the major reason for this. The operating expenses of the company declined, but as a percentage to Gross  Profit they increased to 39%, from 29% of Gross Profits in 1993.  Thus operating profits were depressed, and with a slight increase in financial charges, the profits showed a further  decline.  The profits  showed a net decline of 82%, and other returns (on equity and assets) shows a poor performance for both the years.  Interest coverage further fell to 0.11,  from an already unhealthy figure of  0.42.  Overall financial position has weakened for this company which is mainly attributable to the  general slump in the industry.

94                                            93              (Rs.  In mn)


SALES                                                     2.9                                           7.2

COST OF SALES                     12.3                                         14.5

GROSS PROFITS                     (9.4)                                        (7.2)

OTHER EXPENSES                                5.59                                         7.4

PROFITS BEFORE TAX          (9.9)                                        (3.4)

NET INCOME                                         (9.79)                                      61.95

LOSS BROUGHT FORWARD                (100.2)                                    (161.2)

LOSS CARRIED FORWARD   (110)                                       (100.2|)




CURRENT RATIO                   2.28                                         1.4

QUICK RATIO                                        0.09                                         1.73

LEVERAGE                                            0.19                                         0.57

INTEREST COVERAGE         –                                                –

ASSET TURNOVER                                –                                                –

PROFIT MARGIN                   3.28%                                      849%

RETURN ON ASSETS                             10.8%                                      41.19%


DAYS RECEIVABLE                              24.26                                          –

DAYS INVENTORY                               965.2                                       970.6

DAYS PAYABLE                    198.77                                     554.07


Against a capacity of 6000 units, only 19 and  10 units were produced in ‘93 and ‘94 respectively.  Then during July – Oct.’94, 16 units were sold.  Sales declined by 59%, from Rs. 7.29 mn in ‘93 to Rs. 2.978 mn in 94.  The management reports that they had to sever business relationship with Ford New Holland Inc.  in order to halt the continuous  loss incurring process. The company has now  turned to different products.

Losses of Rs 110.8 mn have wiped out 59% of its equity.  Net loss of this year was Rs. 9.9 mn, as against sale of Rs. 2.9 mn.  Cost of sales alone was Rs. 12.38 mn, and thus 4 times that of sales.

The balance sheet of the company reduced by 39%, from Rs. 150.3 mn  to Rs. 91.1 mn.  The company has no long term liabilities, while running finance reduced from Rs. 34.69 mn to Rs. 7.93 mn.  Thus the payment s received from all the claim receivables of Rs. 50.85 mn on the current assets side is matched, and liquidity is maintained.

The company is in major difficulties, and is actively trying to shift its line of business.  Half of the company’s  equity is wiped off,  and the continuing slump in the auto industry offers no prospects for Allied Motor Co. Ltd.



Pak Suzuki is the largest car manufacturer in Pakistan with a capacity of 50,000 cars per annum.  The company was incorporated in August 1983  as a joint venture between Suzuki Motor Company of Japan and the Pakistan Automobile Corporation.  Under the government privatization program, Suzuki was privatized in September 1992, leading to Suzuki of Japan taking a 40% equity stake and effectively taking over management control.  Pak Suzuki produces a wide range of cars, catering to both the high and low ends of the market.  It is the only manufacturer in Pakistan with such diverse product lines, enabling it to spread sales risk from any one segment.  This diversity gives Suzuki immense marketing strength and a well recognized company name and image.  In addition, the large production capacity gives Suzuki the ability to reduce average production costs per car.

1993                        1994   (Rs. in million)

SALES                                                     5,362                       4,262

COST OF SALES                     5,377                       4,345

GROSS PROFIT                       -15.00                      -83.00

OPERATING COSTS                               105                          75

FINANCIAL CHARGES                          195                          234

PROFIT BEFORE TAXES       -232                         -303

PROFIT AFTER TAXES          -241                         -297



CURRENT RATIO                   1.13                         1.01

QUICK RATIO                                        0.37                         0.35

PROFIT MARGIN                   —                            —

TOTAL ASSET TURNOVER  1.03                         0.89

RETURN ON ASSETS                             —                            —

TIMES INTEREST EARNED  —                            —

DEBT/EQUITY                                       —                            —

RECEIVABLE DAYS                              2.09                         0.54

INVENTORY DAYS                               111                          184

PAYABLE DAYS                    11.75                       12.83

OPERATING CYCLE                              101.34                     171.68


As is quite apparent from the ratios above, Suzuki’s profitability was highly affected in the last two years.  This may mainly be attributed to the yen movements.  All  CKD kits of the company are imported from Japan.  As the CKD costs make up 50% of the total manufacturing costs of the company, hence there has been a steep incline in the company’s manufacturing costs.  A 1% appreciation in the yen affects the profits of the company by a slash of over 23%.  To counter this, the company has increased its prices three times during 1994-1995, leading to an annual rise of Rs. 125,000 for the 1300 cc Margalla, Rs. 53,000 incline for the 800 cc Mehran, and a Rs. 105,000 jump for the 1,000 cc Khyber. The current ratio of the company fell due to the increase in current liabilities, arising mainly due to the enhanced bills payable.

Pak Suzuki is expected to come out of its currently depressed position as it raises its prices during 1995.  This price increase will wipe out the losses of the company, and  the company is expected to show healthy growth of 26% over the next two years.  As the company increases production, the fixed costs will spread out over a larger base, and cost per unit will decline.  As the company’s working capital is positive, it does not rely on bank loans.   Pak Suzuki has planned a rights issue which will raise Rs. 600 mn for the company.  This amount will be used to pay off short term debt of the company, in turn reducing the interest costs.   The reduction in inventory  due to higher sales, effective utilization of existing stocks, and no new capital expenditure will add to the cash generation of the company, thus leading to better  prospects.



Even after 15 years of making passenger vehicles locally, the auto industry in Pakistan  has failed to be competitive without substantial protection.  However, we still see foreign car manufacturers cueing up to enter  the Pakistani market.  We see a situation where supply far exceeds the demand, and manufacturers have to be highly competitive to take each others shares.

Similar  was the  case in India during 1993 – 94, where the auto manufacturers faced a high risk of failure.  The case for India was that with a per capita income of only $350, the emergence of new competitors on the scene led to a saturated market  with expensive foreign cars which the Indians could not afford.  Now for the Pakistani consumer, with a per capita income of only  $420 does not the same case apply?

Thus there  is a high risk of failure faced by our auto manufacturers.  Faced with an almost stagnant economy (hardly 4% growth as against 3% population growth), it is worth thinking that is  it possible to absorb so many locally produced cars.  If we face outward towards the export horizon then first we have to become  extra competitive manufacturers.  With the local consumers’ preference for foreign manufactured cars, the possibility seems far fetched.  The question is that how far can local manufacturers rely on the government to legislate auto-friendly policies.  Sooner or later the industry has to become self reliant. For the local industry to boom, many other factors besides government policies are to play a part.  The rupee exchange value, the law and order situation,  the per capita income , etc., all are to go long way in determining the future of the automobile  industry in Pakistan.

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