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Honda sales, profit fall in drastically due to lockdown

Company says nearly third of car cost paid as tax

SAMAA | - Posted: Aug 14, 2020 | Last Updated: 5 months ago
Posted: Aug 14, 2020 | Last Updated: 5 months ago
Honda sales, profit fall in drastically due to lockdown

Photo: AFP

Honda Atlas Cars (HCAR) believe Kia Sportage and Hyundai Tucson cannot be classified as competitors in Pakistan to its popular Civic sedan cars since they are both crossover SUVs.

The company said that crossover SUVs and sedans are different categories and cater to different sets of customers.

Hyundai launched its 2000CC Tucson earlier this week while Kia launched the 2000CC Sportage in 2019. Tucson was initially launched with a price range of Rs4.9-5.4 million only for the price to be raised by Rs200,000 the next day. Sportage is available for between Rs4.4 million and 5.4 million. The Civic, meanwhile, is priced at Rs3.7-4.7 million.

Honda acknowledged that the Toyota Yaris has emerged as a potential threat to the Honda City, which starts from Rs2.45 million while the Yaris’s starting price is slightly more at Rs2.47 million.

The company revealed that 70% of City’s parts are made in Pakistan, while the Civic has 60% localised parts. Honda’s crossover SUV, the BR-V, has 40% of its parts made locally.

Honda’s net profit has taken a recent hit, with this year’s figure of Rs682 million (Rs4.77 earnings per share) is 82% less than last year’s. The lockdown hit the company hard, with a loss per share of Rs3.58 occurring during the first quarter.

The recent results reflect the difficulties faced by local car assembling companies amid shrinking margins due to the devaluation of the rupee and the inability to fully pass the cost increases to customers in terms of higher prices as volumes also shrank by 54% year-on-year during the 2020 financial year.

The Honda management said it expects sales to recover significantly during the 2021 financial year with improved macroeconomic environment and lower interest rates. The company also disclosed it has some plans to improve its volumes in the long term.

The company says it currently has a 1-1.5 month order backlog due to increased demand over the last month.

Honda added that 60% of its total sales are to urban customers, while the rural market makes up 40% of the share. Roughly 20-30% of the company’s sales are made via auto financing and it expects the number to rise due to the lowering interest rates and discount packages made available by different banks.

The company said that around 33% of the car’s price is paid to the government via taxes, warning that prices may be increased further in the future if gross-profit margins are to be maintained.

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