Honda to Enter Hybrid Market with Rs5bn Investment in New Plant

Staff Report: Honda Atlas Car (HCAR) plans to launch several models, including entering the hybrid market soon, in response to increased competition. The CAPEX for setting up a hybrid plant is Rs5bn.
HCAR conducted its corporate briefing on 1QMY25 performance and to discuss current and future operational dynamics.Check Out the Latest Honda Bike Prices in Pakistan 2024

This year, there were no issues with the opening of LCs; however, subdued demand and a shrinking economy led to lower revenues.

Localization levels for different HCAR models are as follows: Civic over 60%; City 73%; BRV and HRV less than 50%.

The tax benefit in the March quarter resulted from HCAR’s consistent history of paying minimum tax. This accumulation of minimal tax payments led to an adjustment in the company’s tax liability of Rs1.13bn, decreasing the effective tax rate from 86.9% to 15.2% for FY23-24.

HCAR is exporting spare parts and exploring opportunities to export CPU parts.

Approximately 10-15% of imports come from Japan, while the remainder is sourced from Thailand. As a result, a minor benefit of currency devaluation was seen.

During this year, the policy rate increased by 2%, reaching 22% by the end of the year (i.e., Mar 2024), which posed significant challenges for the auto sector. Overall, the passenger car market decreased by 45%.

During MY25, the industry is expected to show some recovery as the policy rate is expected to fall, leading to significant improvements in the lower car segment and hybrids. Within two years, the sector is projected to reach a reasonable size.

For 1QMY25, margins were lower than usual as volumes fell, and to avoid burdening customers with additional taxes, margins were kept low. HCAR recorded earnings of Rs1.42 per share, up 40% YoY but down 85% QoQ. Gross margins declined from 8.4% to 6.5%.

Management stated that the margins will remain competitive with the market.