Honda Atlas to launch hybrid vehicles amid increasing competition

WEB DESK: Honda Atlas Cars Limited (HCAR) has unveiled plans to enter Pakistan’s hybrid vehicle market, potentially with the HR-V model, in response to increased competition from rivals like Corolla Cross and Haval.

This announcement was made during a briefing after the company released its financial results on Thursday.

HCAR intends to invest Rs5 billion in establishing a new hybrid production facility, though no timeline has been provided. This follows a similar announcement made in July of the previous year.

Analysts, including Sunny Kumar from Topline Securities, have noted that while the specifics of the new vehicle and its launch date remain undisclosed, the company’s move is under close watch. JS Research analyst Wadee Zaman commented that the success of the new hybrid model will depend heavily on its features and pricing.

The company also addressed its current financial challenges. Despite having no issues with opening letters of credit, HCAR has seen reduced revenue due to lower demand and a contracting economy.

Localisation levels for HCAR’s models are as follows: Civic at over 60 per cent, City at 73 per cent, and BRV and HR-V at less than 50 per cent. A tax benefit recorded in the March quarter, stemming from HCAR’s history of minimal tax payments, resulted in a tax liability adjustment of Rs1.13 billion, reducing the effective tax rate from 86.9 per cent to 15.2 per cent for FY23-24.

Approximately 10-15 per cent of HCAR’s imports come from Japan, with the remainder sourced from Thailand, leading to minor benefits from currency devaluation. The company is also exploring opportunities for exporting spare and CPU parts.

The auto sector has faced significant challenges this year due to a 2 per cent increase in the policy rate, which reached 22 per cent by March 2024, contributing to a 45 per cent decline in the passenger car market.

However, HCAR anticipates a recovery in the 2025 model year, with improvements expected in the lower car segment and hybrid models. The sector is projected to regain a reasonable size within two years.

HCAR reported earnings of Rs1.42 per share, a 40 per cent increase year on year but an 85 per cent decrease quarter on quarter. Gross margins fell from 8.4 per cent to 6.5 per cent, though the company expects margins to remain competitive.

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