Honda Atlas sees potential surge in car sales

Company’s management optimistic about potential surge in car sales, provided there are no restrictions on LCs imports

KARACHI:

Honda Atlas Cars (Pakistan) Limited (HCAR) conducted a corporate briefing on Monday, revealing its financial performance during March Year (MY) 2023 and outlining its future strategies. Despite facing challenges in the past year, the company’s management remains optimistic about a potential surge in car sales, provided there are no restrictions on LCs imports.

In MY23, HCAR reported earnings of Rs1.82 per share, a significant decline from Rs17.58 per share in the same period last year. Despite this setback, the company sees a promising future and anticipates an improvement in sales volumes. The previous year saw HCAR selling 25,726 units, representing a 31.6% decrease compared to the 37,613 units sold in MY22.

“The potential relaxation of SBP constraints on LC openings can have a positive impact on our import operations,” stated the management of HCAR, emphasising their optimistic stance. As part of their long-term planning, the company is actively working on a hybrid vehicle project, a venture that could mark a significant milestone for HCAR, according to Ismail Iqbal Securities, Auto Analyst, Muhammad Saad Imran.

HCAR recognises the significance of localisation efforts in their future strategies. Currently, the localization levels for their various models stand at 71% for City, 61% for Civic, 52% for BR-V, and 55% for HR-V. These efforts aim to reduce dependency on imports and mitigate risks associated with fluctuations in foreign currency exchange rates, particularly the US dollar.

However, rising interest rates have impacted HCAR’s sales mix, with auto-financing share dropping from 35%-40% to 10%-15%, as mentioned by Usama Rauf of AKD Research. Despite this challenge, Sunny Kumar, auto sector analyst at Topline Securities, assured that the company plans to increase car prices in response to further rupee devaluation or additional tax hikes, aiming to offset the impact of fluctuating exchange rates.

HCAR remains hopeful about achieving sales volumes similar to those of MY23 if import restrictions are further eased. Despite a challenging start in 1QMY24, where only 604 units were sold compared to the MY23 quarterly average of 6.4k units, the company maintains an optimistic outlook for the future.