Pak Suzuki expected to announce major CKD model upgrade, extension

KARACHI: Pak Suzuki (PSMC) is expected to announce a major CKD model upgrade or extension, meanwhile, the launch of Mega Carry Xtra in the CBU pickup segment could be a push in the right direction over the medium term.

Mapping out the trend of pickup sales, AKD Securities looked at the growth potential of this burgeoning automotive segment. There could be some discrepancy since datasets regarding this segment are incomplete because FAW does not report sales to Pakistan Automotive Manufacturers Association (PAMA).

The government of Pakistan needs to highlight this segment as a key beneficiary of CPEC investment spill-over. Furthermore, taking a comprehensive look at PSMC’s offerings in the segment, while comparing them to local offerings in the CKD category, cost-based competition would be the bedrock of competitive dynamics in the segment.

In the meantime, status quo is expected to prevail at the OEM for the medium term, where heightened capital expenditure (CAPEX), increased investment in localising high-value components. Focus on improved features augurs well for cushioning the OEM against the erosion of market share dynamics. At a trade price of Rs 800.7 per share, the 57 per cent upside on offer indicates significant under-pricing by market participants.

Having included the Hilux Single Cabin in the analysis of the pick-up sales, steady sales of this variant in INDU’s product mix, where repeat sales from commercial entities and GOP agencies have kept the variant in production since 1996.

Pickup market is a function of commercial fleet sales. While features, build quality and weight loading capacity are key factors in moulding buying behaviour, it is believed only price competitive offerings will be materially impacting the OEMs profitability and fending off market share from expected entrants; Sazgar Engineering, United Motors and Ghandhara.

On the matter of the Mega Carry Xtra launched by PSMC in the CBU pickup category, it is believed that the hefty price tag Rs 1.5 million will inhibit inroads into the local transport and logistics commercial sale market.

Tracing PSMC’s most recent offering to its source, AKD Securities focused on LCV and Pickup variants offered to customers in Indonesia by Suzuki Motors. Having a range of upgraded offerings with superior specifications to variants offered by PSMC, Suzuki Motor Indonesia offers a rudimentary blueprint for additional upgrades PSMC may offer, to compete against new entrants and fend of threats to market share.

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