From making small-time rickshaws and tractor wheel rims to making road-dominating SUVs, Sazgar’s jump in the last year has been exceptional. The company began to assemble two Chinese brands: BAIC and Haval domestically in FY22 and only ramped up production in FY23 with the introduction of the latter’s SUV. The investment is paying dividends- literally. During the outgoing year, shareholders enjoyed a dividend payout of 24 percent from Sazgara after a 5-year hiatus.
About 1800 units of four-wheeler sales completely changed the game for the company—of this, exactly 1657 units belonged to Haval. Despite selling over 15,000 units of rickshaws last year, 55 percent of the company’s revenues came from four-wheelers (some 997 units). In FY23, the difference has become starker. More than 80 percent of the revenues came from four-wheelers during the year, which means the rest—20 percent was earned through roughly 9000 units of rickshaws and 37,500 units of tractor wheel rims.
With Haval on board, Sazgar’s revenues grew 77 percent in FY23 at a time when the economy is a mess and the automotive market is quickly swallowing the shrinking potion. Comparing the four-wheeler revenue per unit sold between FY22 and FY23, the increase of 39 percent shows the move to Haval was the right one, no debates about it.
While diversifying into new segments such as SUVs and new models/brands has worked in Sazgar’sfavor, its other segments are too small in comparison and not making enough money. The company exports three-wheelers to Japan, Ethiopia, Qatar, Dubai, Marutiana, and Afghanistan (according to its annual report), and yet revenues declined nearly 40 percent in FY23.
Since the introduction of the Auto Policy 2016 that welcomed new entrants to assemble vehicles in Pakistan, an overwhelming narrative has picked up steam that Pakistan is/will experience a natural progression from sedans to SUVs, the way the world has. This is why so many new players jumped on the SUV bandwagon and succeeded—from Kia to evidently Sazgar—the money made through SUVs is mouth-watering indeed. Meanwhile, companies like Suzuki that predominantly assemble small cars are in doldrums. The market is so small and the market shares are so miniscule, that without economies of scale, volumes of small cars are simply not enough. Meanwhile, a vehicle like Haval (that comes in petrol and hybrid) costs between Rs9.5 million to Rs12 million—comparatively, a Sazgar’s 9-seater rickshaw costs a tiny fraction of this (about 9% or a multiple of 9-10x).
The question is, will there be enough demand for SUVs in coming years? A substantial transition to SUV would really depend on incomes growth over the next couple of years, how affordable and accessible bank financing will become and largely, whether Pakistani roads and infrastructure can carry the burden, and really, the cost to public expenditure,that these large vehicles will incur. There is a lot to consider here. Do the current SUV sales represent or even signify that the transition to SUVs is happening, more on that next time. For now, Sazgar is making staggering profits selling less than 2000 units of its SUVs—and that’s news worthy.
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