New 800cc car to hit market, may slightly impact Mehran’s sale

It will be assembled locally; annual production may be 5,000 units

KARACHI: United Motors, which has 22% and 18% market share in motorcycle and three-wheel categories respectively, is now entering the passenger car market and will be tapping the most price-sensitive segment of the society, which has largely been catered to by Suzuki Mehran.

According to Elixir Securities Research Analyst Farheen Irfan, United Motors will assemble four-wheel 800cc Bravo locally and its booking will commence in a month or two.

"According to my assessment, the annual production capacity of Bravo will be 5,000 units," said Irfan. "I have run a price sensitivity analysis and concluded that the company has to price it between Rs650,000 and Rs700,000 if it wants to sell up to its capacity."



She added that only 3,000 units of Bravo would be sold next year if the company priced it around Rs750,000.

"Bravo can slightly impact Suzuki Mehran's market if its 5,000 units are sold in 2019," she said. "Mehran's sale may fall by 3,000 units in that case."

Mehran is currently the cheapest passenger car available in Pakistan with its VX model priced at Rs769,000 and VXR model at Rs840,000.

Suzuki sold 46,221 units of Mehran in financial year 2018, which translates into 21% of total passenger car sales in the country. The car contributed 31% to total revenues of the company.

"Suzuki might be wrapping up Mehran's production next year but the company will certainly not be giving up the segment which generates almost one-third of its total revenues," Irfan said.



United Motors received the category-A Greenfield investment status for the assembly of vehicles following the announcement of Auto Development Policy 2016-21. According to reports, the company has invested up to $18.1 million.

Meanwhile, an industry official, while talking to The Express Tribune, said Bravo could not hurt Mehran's market share because it had been widely accepted by the market.

"The answer is a clear no if you ask me that Bravo can hurt Mehran's market share," the official said while requesting anonymity. "Mehran's market can only be affected by model and price change."

According to the official, Suzuki Mehran is a Japanese brand while Bravo is a Chinese completely knocked down (CKD) car which will make a substantial difference for Pakistani buyers, who consider Japanese cars to be of superior quality.

"Bravo will attract its own segment of buyers just the way FAW's 1,300cc V2 did without hurting sales of any other 1,300cc vehicle," the official said, adding Bravo's performance would be the key while deciding whether to go for it or not.

The official, however, pointed out that the buyers were generally hesitant to buy a newly launched car since it had not been tested on the country's infrastructure.

"Mehran is a tried and tested car so I don't think Pak Suzuki has anything to fear from Bravo," he said.

Published in The Express Tribune, September 8^th, 2018.

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