KARACHI: Ghandhara Nissan announced that it will start the production of Datsun vehicles in Pakistan, adding to the list of Japanese cars already present in the near $300-billion economy.
While its officials fell short of announcing the name of the vehicles intended to be launched, Datsun specialises in the low-budget smaller car segment. Market talk suggests that Nissan’s Datsun Go is likely to be offered in the Pakistani market. The vehicle is priced at 331,326 Indian rupees in the neighbouring country.
The launch comes after Pakistan finalised a five-year automotive policy in 2016, offering various incentives on ‘Greenfield’ and ‘Brownfield’ investments in the sector.
Accordingly, Ghandhara Nissan – which already has a plant in the country that would be upgraded to meet the new requirements – has been given permission to revive production under the Brownfield status. Japan’s Nissan Motor Company will provide technical assistance in the partnership that comprises 100% equity coming from the Pakistani arm. Vehicles are expected to be rolled out within fiscal year 2018-19.
Officials said the company would invest Rs4.5 billion – about $41 million – over the first four years. “Production capacity is likely to stand near 32,000 units a year (at the start) with hope that it would increase as demand is added,” said Ghandhara Nissan Chief Executive Officer Ahmed Kuli Khan Khattak during the press conference on Wednesday.
Pakistan’s total production has grown steadily in the last five years with the eighth-month figure (July-February 2017-18) standing at 170,354 units, a 23% increase year-on-year. In comparison, the annual figure for the entire fiscal year 2016-17 was less than 187,000. With growth set to continue amid low levels of inflation and interest rate in the near future, carmakers are bullish on Pakistan armed with a bulging middle class and an overall population of over 200 million.
Several automakers have already announced their intention to enter the Pakistani economy, which posted its highest growth rate in over a decade at 5.3% in 2016-17 but still remains behind in terms of cars per 1,000 people when compared with regional countries.
South Korea’s Hyundai Motor Company has announced its entry in partnership with Nishat Mills Limited, while Kia Motor will launch its vehicles through a joint venture with Lucky Cement. French carmaker Renault is also tipped to enter the country’s auto sector, along with Germany’s Volkswagen.
“We see the market growing to 300,000 units a year,” said Nissan Senior Vice-President Peyman Kargar as he discussed Nissan’s plan of entering the growing market. “This is a perfect match (Pakistan’s growth and Nissan’s entry). We will offer more choice, more quality and more innovation with the Datsun brand.
“We will liberate and improve the whole value chain opportunity in the country – from the manufacturing side to the level of suppliers. We will work with the suppliers to improve their level.”
Ghandhara Nissan initially plans to feature a 20% localisation component to its vehicles, increasing it when and if cost-effectiveness and quality of parts in Pakistan improves.
The company started vehicle production in Pakistan in December 1996, but production activities came to a halt in 2010. Its car assembly plant has remained inactive since.
However, the company’s share price has already increased over 38.7% since The Express Tribune reported that the company is likely to get government permission to resume car production. It closed at Rs270.19 on Wednesday, increasing Rs75.45 or 39% over the course of the month, more than outperforming the benchmark KSE-100 Index that managed a 3.8% advance.
“The share price has already increased (close to) 40% on the news that it would launch Datsun vehicles,” said Faisal Jawed, head of sales at IGI Securities. “The impact on earnings through the launch will determine whether there is more upside to it. With increasing competition from Hyundai and Kia, we will have to wait and see Datsun’s market penetration before analysing the share price.”
Ghandhara Nissan reported a profit of Rs197 million – EPS of Rs4.38 – in the half-year period of July-December 2017, a decrease of over 30% compared with a profit of Rs282 million or EPS of Rs6.26 in the same period of the previous year.
Published in The Express Tribune, March 29th, 2018.