Motorcycles: Local market leader, Atlas Honda looks to exports
Afghanistan, Iran, Central Asia the new target as company seeks economies of scale.
KARACHI:
Having established an undisputed dominance of the Pakistani motorcycle market, Atlas Honda is now looking at foreign markets as its next phase of growth, with exports to Bangladesh and Afghanistan expanding rapidly.
In the first five months of the fiscal year ending March 31, 2012, Atlas Honda exported more than 12,500 motorcycles from Pakistan, as many as the number it exported during the entire financial year 2011, according to Raziur Rehman, the company’s general manager for corporate affairs.
“Looking at the export figure, we think that we can easily double our exports this year,” said Rehman. “We believe we can further expand our export markets to Iran, Central Asia and Africa.”
Atlas Honda produced approximately 571,000 motorcycles during financial year 2011, which is 68% of Pakistan’s local production. The company appears to be on track to produce 650,000 units this year, even as the total market for motorcycles (including imported vehicles) is set to touch 1.5 million.
The company is now targeting the 1 million units a year mark as its next psychological barrier. Atlas Honda also wants to reduce its cost of production by increasing the local content. It aims to take the ratio of local content in its motorcycles from 92% to 100%.
A key barrier to lowering costs has been the relatively small size of the local market. The Pakistan market is only 1.5 million motorcycles a year, compared to the 8 million motorcycles sold last year in India, according to Rehman.
While the market for locally manufactured motorcycles, in terms of volumes, has been growing at 22.6% annually over the past decade, Atlas Honda appears to feel that expansion into export market is the only way to attain the scale it needs to effectively compete on pricing.
The company’s major advantage seems to be the 70 cc motorcycle. Atlas Honda is the only partner of Honda that manufactures the CD-70 model, a highly popular one in places like Afghanistan, particularly due to pricing. Atlas’ Indian competitors tend to focus on the 100 cc model.
“The Indian 70 cc motorcycle costs about Rs70,000. Ours is about Rs66,000,” said Rehman. “We also have a good after-sales service network in Afghanistan.”
Closer to the home front, executives at the company say that the advent of cheaper Chinese-manufactured motorcycles in the Pakistani market has not hurt them at all and may in fact have helped their brand.
“When people use low quality motorcycles [from China] and have to change them in a few months at half the original price, they come to us. We offer top quality with the highest resale value,” said Afaq Ahmed, general manager for research and development projects at Atlas Honda.
Nonetheless, observers argue that even though people are willing to pay a premium for Honda motorcycles over their Chinese competitors, the existence of a cheaper alternative may have forced the company to keep its prices low.
Atlas Honda is a joint venture between the Atlas Group – a local financial and industrial conglomerate – and Honda, the Japanese car giant. Honda operates through two joint ventures in the Pakistani automobile sector, both with the Atlas Group. It owns a 51% stake in Honda Atlas Cars (a sedan manufacturer) and a 35% stake in Atlas Honda (the motorcycle manufacturer).
In financial year 2011, the company had sales of over Rs32.5 billion and a net income of over Rs1 billion. The company’s stock, however, has not been doing well for the year, closing at Rs118 on Friday in trading on the Karachi Stock Exchange, down by 5.6% for the year.
Published in The Express Tribune, October 31st, 2011.
Having established an undisputed dominance of the Pakistani motorcycle market, Atlas Honda is now looking at foreign markets as its next phase of growth, with exports to Bangladesh and Afghanistan expanding rapidly.
In the first five months of the fiscal year ending March 31, 2012, Atlas Honda exported more than 12,500 motorcycles from Pakistan, as many as the number it exported during the entire financial year 2011, according to Raziur Rehman, the company’s general manager for corporate affairs.
“Looking at the export figure, we think that we can easily double our exports this year,” said Rehman. “We believe we can further expand our export markets to Iran, Central Asia and Africa.”
Atlas Honda produced approximately 571,000 motorcycles during financial year 2011, which is 68% of Pakistan’s local production. The company appears to be on track to produce 650,000 units this year, even as the total market for motorcycles (including imported vehicles) is set to touch 1.5 million.
The company is now targeting the 1 million units a year mark as its next psychological barrier. Atlas Honda also wants to reduce its cost of production by increasing the local content. It aims to take the ratio of local content in its motorcycles from 92% to 100%.
A key barrier to lowering costs has been the relatively small size of the local market. The Pakistan market is only 1.5 million motorcycles a year, compared to the 8 million motorcycles sold last year in India, according to Rehman.
While the market for locally manufactured motorcycles, in terms of volumes, has been growing at 22.6% annually over the past decade, Atlas Honda appears to feel that expansion into export market is the only way to attain the scale it needs to effectively compete on pricing.
The company’s major advantage seems to be the 70 cc motorcycle. Atlas Honda is the only partner of Honda that manufactures the CD-70 model, a highly popular one in places like Afghanistan, particularly due to pricing. Atlas’ Indian competitors tend to focus on the 100 cc model.
“The Indian 70 cc motorcycle costs about Rs70,000. Ours is about Rs66,000,” said Rehman. “We also have a good after-sales service network in Afghanistan.”
Closer to the home front, executives at the company say that the advent of cheaper Chinese-manufactured motorcycles in the Pakistani market has not hurt them at all and may in fact have helped their brand.
“When people use low quality motorcycles [from China] and have to change them in a few months at half the original price, they come to us. We offer top quality with the highest resale value,” said Afaq Ahmed, general manager for research and development projects at Atlas Honda.
Nonetheless, observers argue that even though people are willing to pay a premium for Honda motorcycles over their Chinese competitors, the existence of a cheaper alternative may have forced the company to keep its prices low.
Atlas Honda is a joint venture between the Atlas Group – a local financial and industrial conglomerate – and Honda, the Japanese car giant. Honda operates through two joint ventures in the Pakistani automobile sector, both with the Atlas Group. It owns a 51% stake in Honda Atlas Cars (a sedan manufacturer) and a 35% stake in Atlas Honda (the motorcycle manufacturer).
In financial year 2011, the company had sales of over Rs32.5 billion and a net income of over Rs1 billion. The company’s stock, however, has not been doing well for the year, closing at Rs118 on Friday in trading on the Karachi Stock Exchange, down by 5.6% for the year.
Published in The Express Tribune, October 31st, 2011.