Honda Atlas plans to enter hybrid cars market at CAPEX of Rs5bn: report

Honda Atlas Cars Limited (HCAR) has shared its plan to soon enter the hybrid market in Pakistan – possibly with the HR-V model – in response to increased competition from Corolla Cross and Haval, stated several analysts on Thursday as the company held a briefing after announcing its financial results.

According to information shared by analysts, HCAR said that it will make a capital expenditure of Rs5 billion to set up a hybrid plant. However, the company did not share a timeline for the endeavour.

It had made a similar announcement in July last year as well.

“The company has not revealed anything about the vehicle or when it will launch the model,” Topline Securities research analyst Sunny Kumar had told Business Recorder last year.

Meanwhile, JS Research analyst Wadee Zaman on Thursday said it would be too early to say if the new vehicle will be successful.

“It will depend on the features and price points,” he added.

Honda Atlas said this year, there were no issues with the opening of letters of credit; however, subdued demand and a shrinking economy led to lower revenues.

The company also shared localisation levels for different models – Civic at over 60%; City 73%; BRV and HRV at 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,” wrote Myesha Sohail in her report for Topline Securities.

“Approximately 10-15% of imports come from Japan, while the remainder is sourced from Thailand. As a result, minor benefits of currency devaluation were seen,” Myesha wrote.

HCAR officials said that they are also exporting spare parts and exploring opportunities to export CPU parts.

The company also stated that 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 passenger car market decreased by 45%.

“During MY25, 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.”

HCAR recorded earnings of Rs1.42 per share, up 40% year on year, but down 85% quarter on quarter. Gross margins declined from 8.4% to 6.5%.

“Management stated that the margins will remain competitive with the market,” Topline Securities added.