Honda Atlas Cars (Pakistan) Limited

Case Study of Honda Atlas Cars (Pakistan) Limited

Submitted To: Sir Muddsir Hussain

Submitted By: Khushboo

Benazir Bhutto Shaheed University Lyari, Karachi.

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 Honda Atlas Cars (Pakistan) Limited

TABLE OF CONTENTS

1. Introduction..............................................................................................................................3

1.1. Associated Companies.....................................................................................................4

2.Oraginazational Structure.........................................................................................................4

3.Equity Profile............................................................................................................................5

4.Marketing..................................................................................................................................5

4.1. SWOT Analysis..............................................................................................................5

4.2. CPM Matrix....................................................................................................................6

4.3. EFE Matrix......................................................................................................................6

4.4. IFE Matrix.......................................................................................................................7

4.5.TOWS Matrix.................................................................................................................7

5.Financials ............................................................................................................................8-12

6.Competitos .............................................................................................................................13

6.1. Indus Motors Company Limited .................................................................................13

6.2. Pak Suzuki Motor Company Limited..........................................................................13

6.3. Ghandhara Nissan Limited ...................................................................................13-14

7. Future...............................................................................................................................................14

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 Honda Atlas Cars (Pakistan) Limited

1.INTRODUCTION:
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited
Japan, and the Atlas Group of Companies, Pakistan. The company was incorporated on
November 04, 1992 and joint venture agreement was signed on August 05, 1993. The
groundbreaking ceremony was held on April 17, 1993 and within a record time of 11 months,
construction and erection of machinery was completed. The first car rolled off the assembly line
on May 26, 1994. Official inauguration was done by the then President of Pakistan, Sardar
Farooq Ahmad Khan Leghari. Mr. Kawamoto, President of Honda Motor Company Limited
Japan was also present to grace the occasion. The company is listed in Karachi, Lahore, and
Islamabad Stock Exchanges.

On July 14, 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad.
Since then the dealerships network has expanded and now the company has thirty-three 3S
(Sales, Service and Spare Parts), eighteen 2S (Service and Spare Parts), and six 1S (Spare Parts)
authorized dealerships network in all major cities of Pakistan. Since the commencement of
production in 1994, the company has produced and sold more than 400,000 cars as of Oct, 2018.
All dealerships are constructed in accordance with the standards defined by Honda World over.

Percentage of local parts conforms to the government's policy. Local vendors are continuously
patronized to develop parts locally. The quality of local parts is thoroughly checked to meet
stringent international standards. Honda Atlas always strive to give outstanding service to our
valued customers. In addition to providing regular service to customers, the company also
regularly conducts Service Campaigns to facilitate customer's need for service. This has given
our customers absolute confidence in our cars which is clearly evident from the ever-increasing
sale volumes.

It is the constant endeavor of Honda Atlas Cars (Pakistan) Limited to achieve No .1 Customer
satisfaction. Honda Atlas Cars (Pakistan) Limited is committed to meet customer expectations
and to provide good value for money. Currently, the company offering Honda Accord, Honda
CR-V, Honda Civic (four variant), Honda BR-V, Honda City Aspire (two variant), and Honda
City (four variant) in wide range of colors with advanced technological features.

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 Honda Atlas Cars (Pakistan) Limited
1.1. ASSOCIATED COMPANIES
1. Atlas Honda Limited
2.Atlas Battery Limited
3.Atlas Engineering Limited
4.Atlas Auto Parts (Pvt.) Limited
5.Atlas Power Limited
6.Atlas Insurance Limited
7.Atlas Asset Management Limited
8.Shirazi Trading Company (Pvt) Limited
2.ORGANIZATIONAL STRUCTURE
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9.Atlas Worldwide General Trading LLC
10.Atlas Venture Limited
11.Honda Atlas Power Products (Pvt) Limited.
12.Atlas Metals (Pvt) Limited.
13.Atlas Foundation
14.Shirazi Capital (Pvt) Limited.
15.Shirazi (Pvt) Limited.
16.Shirazi Investment (Pvt) Limited.
 Honda Atlas Cars (Pakistan) Limited

3.EQUITY PROFILE

4.MARKETING:

4.1. SWOT Analysis:

Strength Opportunities
HACPL is Pakistan’s third-largest car producer
Honda is ISO 9001 (Quality Management System) Honda atlas does not cover the whole market and
and ISO EMS (Environment Management System) currently focus on the high-end customers. It can
compliant organization break through in low range vehicles (below
1300cc) and can gain grounds.
The company has a wider dealership network all It could be hard for new entrants to gain a foothold
over Pakistan. in a slowing market; particularly as rising inflation
will need to be curbed by monetary policies.

Honda atlas retains 142,800,000 of overall market Customer desire for hybrid and fuel-efficient
share. vehicles.
Advance technology/equipment. Budget friendly & economy cars.
Smoother drive as compares to its competitors.
Weakness Threats
The factory of Honda is located away from Movement in the steel prices in the future period
seaports due to which company has to bear higher may adversely affects the production cost and
transportation charges. profit as it has over the past years. Rising inflation
and interest cost thus affecting the mark-up in car
leasing had reduced financing option for
consumers.
Spare parts of Honda atlas cars are expensive Pak-Suzuki is a dominant force in the auto
industry in Pakistan, along with other
manufacturers such as Indus Motors and Hyundai;
Honda Atlas is facing strong competitive forces in
the industrial field.
Limited Product Line. Political instability.

High Cost of Production. Energy crises.

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 Honda Atlas Cars (Pakistan) Limited

4.2.CPM Matrix:

CRITICAL SUCCESS Weights HACPL PSMC GNL

FACTORS (CSF)
Ratin Score Rating Score Rating Score
g
Market share 0.10 4 0.4 3 0.3 3 0.3
Customer loyalty 0.20 3 0.6 3 0.6 3 0.6
Financial position 0.15 3 0.45 3 0.45 2 0.3
Management 0.07 1 0.07 2 0.14 1 0.07
Price Competitiveness 0.10 4 0.4 4 0.4 4 0.4
Product quality 0.15 3 0.45 3 0.45 4 0.6
Technology 0.10 2 0.2 3 0.3 4 0.4
Durability 0.05 4 0.2 3 0.15 1 0.05
Sales distribution 0.08 3 0.24 2 0.16 3 0.24
TOTAL 1.00 3.01 2.95 2.96

Rating; 4=Major Strength, 3=Minor Strength, 2=Minor weakness, 1=Major weakness

4.3.EFE Matrix:

Key External factors Weight Ratin Score

g
Opportunities
Awareness about Global Warming. 0.07 4 0.28
Hybrid and fuel-efficient vehicles. 0.10 3 0.3
Increase in technology. 0.15 4 0.6
Increase in demand of small vehicles. 0.15 2 0.3
Automobiles increasing. 0.09 1 0.09
Threats
Political Instability. 0.05 3 0.15
Energy crisis. 0.05 3 0.15
Rising fuel and steel prices. 0.14 3 0.42
Inflation & Tax rates. 0.10 2 0.2
Depreciation of rupee against dollar. 0.10 2 0.2
Total 1.00 2.69
Rating: 1=Poor, 2= Below average, 3=Above average, 4=Superior

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 Honda Atlas Cars (Pakistan) Limited

4.4.IFE Matrix:

Key Internal factors Weight Rating Score

Strengths
Brand Image 0.15 4 0.6
Strong R&D 0.10 3 0.3
Timely new models 0.07 3 0.21
Advance technology/equipment 0.20 3 0.6
Customer loyalty 0.15 3 0.45
Weaknesses
Costly spare parts 0.08 2 0.16
Dealership network 0.05 2 0.1
Shortage of trained technician 0.07 2 0.14
Limited product line 0.08 1 0.08
High production cost 0.05 2 0.1
Total 1.00 2.74
Rating; 4=Major Strength, 3=Minor Strength, 2=Minor weakness, 1=Major weakness

4.5. TOWS Matrix:

Internal Factors
Strengths Weaknesses
SO WO
By using technology hybrid and fuel- Introducing new budget friendly small
efficient vehicle can be Manufactured. vehicles.
Opportunities
Through R&D global warming can be Introduction of flexible fuel vehicle
Externa minimize and customer awareness program and going for product diversification.
l can be conducted.
Factors
Threats ST WT
Utilize research and development to Rightsizing
minimize the steel prices
Energy crises can be minimizing Strict employee policies to contain
through advance technology (by using overhead and unfavorable economic
more efficient Plants & Equipment). condition,

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 Honda Atlas Cars (Pakistan) Limited

5.FINANCIALS:

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 Honda Atlas Cars (Pakistan) Limited

Continued..

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 Honda Atlas Cars (Pakistan) Limited

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 Honda Atlas Cars (Pakistan) Limited

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 Honda Atlas Cars (Pakistan) Limited

During the year under review, the Company produced 48,608 units as compared to 50,177 units
produced of last year, whereas sales were recorded at 48,648 units against 50,100 units of last
year, showing a decline of 2.90%. Despite, challenging economic conditions, the Company was
able to achieve its ‘second best’ results in terms of production & sales. Notwithstanding tough
headwinds, the Company can look back on an overall positive business performance in the year
ended March 31, 2019. Despite some slight downward trends in figures, the Company’s results
of operations, financial position and net assets are indicative of a solid financial condition. This
year, the Company has generated highest sales revenue of Rs. 95.128 billion as compared to Rs.
91.523 billion last year. The increase was mainly due to the price revisions made during the year.
However, gross profit declined from Rs. 10.449 billion to Rs. 7.304 billion, down by 30.10%.
This was due to factors stated above and had significant impact on cost of production. The
Company increased car prices, yet it did not pass on complete cost differential to its customers
and bore some part of it, which significantly depressed Company’s profitability.

The Selling & General Administrative (SGA) expenses increased to Rs. 1.732 billion against
Rs.1.594 billion, a year on year increase of 8.61%. Other income was recorded at Rs. 1.314
billion against Rs.1.883 billion, down by 30.24% mainly due to realization of short-term
investments to meet working capital requirements. The financial & other charges recorded at Rs.
1.292 billion, up by 2.63% as compared to last year. Resultantly, the Company achieved profit
before tax of Rs. 5.594 billion against Rs. 9.479 billion, representing a decrease of 40.99%. Net
profit after tax was Rs. 3.851 billion against Rs. 6.494 billion of the corresponding periods last
year. This translated into earnings per share of Rs. 26.97 against Rs. 45.48 of last year.

During the last five years, the Company has maintained an average payout ratio of 37% to the
shareholders, while retaining the undistributed profits for strengthening the balance sheet
position of the Company. During the same period of last five years, the shareholders’ equity has
grown more than 3.4 times, which now constitute 55% of the total assets as on 31 March 2019,
as compared with 37% in 2015. The basic and diluted earnings per share after tax is Rs. 26.97
(2018: Rs. 45.48).

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6.COMPETITORS:

6.1. Indus Motor Company Limited:

Indus Motor Company Limited was incorporated in Pakistan as a public limited company in
December 1989. The Company was formed in accordance with the terms of a Joint Venture
agreement concluded amongst certain House of Habib companies, Toyota Motor Corporation
and Toyota Tsusho Corporation for the purposes of assembling, progressive manufacturing and
marketing of Toyota vehicles. The Company also acts as the sole distributor of Toyota and
Daihatsu vehicles in Pakistan and has a license for assembling, progressive manufacturing and
marketing of these vehicles in Pakistan.

6.2. Pak Suzuki Motor Company Limited

Pak Suzuki Motor Company Limited (“the Company”) was incorporated in Pakistan as a public
limited company in August 1983. The Company was formed in accordance with the terms of a
joint venture agreement concluded between Pakistan Automobile Corporation Limited
(“PACO”) and Suzuki Motor Corporation, Japan (the Holding Company). The Company is
engaged in the assembling, progressive manufacturing and marketing of Suzuki cars, pickups,
vans, 4x4s and motorcycles and related spare parts.

6.3. Ghandhara Nissan Limited

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 Honda Atlas Cars (Pakistan) Limited

Ghandhara Nissan Limited (the Company) was incorporated on August 8, 1981 in Pakistan as a
private limited company and subsequently converted into a public limited company on May
24,1992. The principal business of the Holding Company is assembly / progressive
manufacturing

of vehicles including JAC Trucks, import and sale of Nissan, Dongfeng and Renault vehicles in
Completely Built-up condition and assembly of other vehicles under contract agreement. The
Company is a subsidiary of Bibojee Services (Private) Limited.

7.FUTURE
Challenges at both, international and domestic fronts, require a well thought out and decisive
policy response to ensure stability in the tough phase ahead. On the economic side, taking stock
of the evolving developments, it is evident that measures addressing structural problems are
required. This together with clarity on external funding arrangements, will provide the much
needed support to the balance of payments position. For Pakistan, CPEC remains the largest
source of foreign investment. The Prime Minister’s visit to China facilitated both countries into
entering the next phase under which areas of cooperation are to be expanded. Rising input costs
on the back of higher energy prices and the lagged impact of exchange rate depreciation are
likely to maintain upward pressure on inflation despite moderation in aggregate demand. Short
term measures for fiscal consolidation need to be complimented with implementation of
medium-term structural reforms. Once the economy regains its balance, it is expected that the
economy will resume its growth momentum, which would boost the demand for automobiles
also. The Company has laid the foundation for long term sustainable leadership and is committed
to achieve profitable growth, financial flexibility and operational excellence. The Company has
been focusing on the revamping the financial position and have positive prospects for improved
financial results next year. We will keep focus on improving all-round efficiency, controlling

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Running expenses, innovation in product line-up and excellent after sales back up for customer
satisfaction.

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