KARACHI: Pak Suzuki Motor Company, the biggest automaker in Pakistan by market share, has officially announced that it will discontinue bookings for its popular car model, Mehran.
“Keeping in view the discontinuation of Suzuki Mehran’s production, Pak Suzuki is constrained to stop booking of the variant (all versions),” said a notification the company sent to its authorised dealers.
However, “all pending orders received till April 4, 2019 will be served within our commitment,” wrote Rashid Hameed Khan, Divisional Head of Sales in the notification.
“The discontinuation of Mehran has been notified, however, clarity on its substitute is awaited in the market,” remarked Faizul Sultan, an analyst at BMA Capital.
According to an industry source, Alto 660cc will be introduced as an alternative next month.
The alternative would be costlier than Mehran as in Mehran 65% of parts were produced in the country while in the alternative the share of local parts would not be more than 55%, he said. “This means the company will be importing more parts.” It may affect the production cost as the rupee has lost about 33% of its value against the US dollar since December 2017.
“Bearing all the facts in mind, the alternative car’s price will be around Rs1.1 million,” the analyst estimated. However, at present, the price of Mehran VX is Rs799,000 and Mehran VXR is Rs880,000.
Talking about the maintenance of Mehran, Sultan said it was not an issue any more as Suzuki had a vast established network and many outlets and workshops across the country.
“It is a perfect time for Suzuki to halt Mehran sales and bring a new car as demand for vehicles of small engine capacity is intact,” the analyst said. “The market knows about the alternative as Suzuki Alto is already being imported.”
On the other hand, the government is discouraging imports. It has introduced a policy under which a person who ships a vehicle under the gift policy will have to pay the duty in dollars. Following this policy, the import of old vehicles declined 43% in first half of the current fiscal year, according to the Pakistan Bureau of Statistics.
“At least in the next two years, imported vehicles won’t be a problem for the company,” said Sultan. “The segment up to 800cc will remain safe from competition.”
Sales volume will not be problem for Pak Suzuki, but margins will remain under pressure due to the high cost following rupee depreciation.
“Pak Suzuki has made a timely decision as new players are entering the auto sector of Pakistan and a car without innovation since the 1980s would not have lasted longer in such a scenario,” said the analyst.
In eight months of the current fiscal year, Suzuki produced 28,944 units of Mehran, but the company sold only 22,460 units, according to the Pakistan Automotive Manufacturers Association (PAMA).
Published in The Express Tribune, April 3rd, 2019.
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