KASB Auto Conference
Demand, Competition, and Outlook
Khadim Ali Shah Bukhari Securities hosted an Auto Conference yesterday as a part of the KASB Insight Series. The conference brought on a detailed discussion on the growing competition and demand, outlook, and policies surrounding the automotive space. The speakers were CEO of Indus Motors (INDU) Ali Asghar Jamali, COO of Lucky Motors Limited, Muhammad Faisal, and Chairman of PakWheels.com, Suneel Sarfaraz Munj.
Demand: Industry experts unanimously pointed out that demand growth is robust. Response to new model launches being rolled out is overwhelming as well. This is also evident with delivery periods stretching to over 2-3 months for most cars. OEMs are now working at double shift capacity that is in stark contrast to single shift operations in 2019 and 2020. Ali Jamali sees the market reaching 500k vehicles in the next 4-5 years. Pakistan’s market is positively growing with new entrants making their mark as well remarked Suneel Munj. Muhammad Faisal eyes market growth of 65% for the year.
Competition: Influx of new OEMs based out of Korea, Malaysia, and China have made a significant mark says Suneel Munj. Booking figures and delivery periods are a primary gauge on success of the new entrants so far. Most models have delivery times of over 6 months. KIA highlighted that it has seen an overwhelming response to its line up with at least 2 more model launches planned in the near term. Newly launched KIA Sorento deliveries from May to June are sold out. Chinese car makers are garnering widespread interest with competitive pricing as well.
Automobile focused policies: EV policy was at the forefront of discussion that was passed via a presidential ordinance on 12th Feb’21. Speakers noted that EVs have a long way to go in Pakistan considering limited driving range and non-availability of charging infrastructure. Urban centers will be the key area of early adaptors. Suneel felt EV policy may attract cheap variants of Chinese EVs that may fail the purpose of EV policy entirely. AIDP 2016-2021 offers concessions to manufacturers on models for 5 years or June 2026, whichever comes first. The new found clarity to OEMs is providing a push for broader vehicle rollout.
Outlook: The automotive space is exciting growth with no signs of early slowdown in demand. Manufacturers are already looking to ramp up model line-up as well as capacities to match the demand. Lucky Motors Ltd. is rumored to host another global brand while KIA is expected to launch more models before the close of current fiscal year. Competition is benefitting the customers in terms of choices. Low interest rate has increased vehicle affordability. The encouraging outlook underpins our Outperform stance on the Automobile Assemblers sector. We particularly like Indus Motors (INDU) and Pak Suzuki (PSMC).