Toyota Pakistan Affiliate Plans New Small Car by 2014, CEO Says

Indus Motor Co., the Pakistan affiliate of Toyota Motor Corp. (7203), aims to introduce a car by 2014 with an engine capacity of as little as 850cc to replace its Cuore small-car line that’s being discontinued next year.

“The segment that is likely to grow is the small, low segment, as we call it,” Parvez Ghias, chief executive officer of the Karachi-based company, said in an interview yesterday. “It’s the economy segment.”

Indus is anticipating demand for small, low-priced vehicles as Pakistan struggles with inflation and an economy the International Monetary Fund forecasts will expand at the slowest pace this year since 2009. Foreign direct investment slumped 40 percent in July and August from a year earlier, and consumer prices in September rose 10.46 percent from a year earlier after climbing 11.56 percent in August.

“Until three to four years ago, people could lease a car from a bank for as little as 20,000 rupees ($229) a month,” said Shamoon Tariq, a research analyst at Invisor Securities Pvt. Ltd. in Karachi, who has a “buy” recommendation on the stock. “Not anymore. The rates have jumped to almost 50,000 rupees, and no one is going to lease a car that expensive.”

Indus, whose shares have fallen 23 percent this year, plans to increase production at its existing Karachi plant to 70,000 vehicles after seeing margins and profitability squeezed, Ghias said.

“Car prices since January of 2009 have gone up 12 percent, which is nothing compared to, let’s say, the kind of inflation we have experienced in the country,” he said.

New Dealerships

Indus plans to open dealerships this fiscal year in the rural cities of Dera Ghazi Khan and Abbottabad, the CEO said.

“By going into those areas, you are getting close to the customer,” he said. “And the customer feels good about it.”

Indus had a record year in the 12 months ended June, Ghias said, referring to the almost 52,000 Corollas, SUVs and Cuores it built and sold in the period, using its full production capacity.

Industrywide car sales rose 30 percent to 25,553 vehicles in the first two months of the fiscal year started July 1, the Karachi-based Pakistan Automotive Manufacturers Association said in an e-mailed statement Sept. 12. Sales in August rose 8.8 percent to 10,697.

Corolla Sales

Sales of the Toyota Corolla, popular among government employees and farmers, fell to 41,111 in the year ended in June from 43,510 a year earlier, according to the auto parts association.

Photographer: Asim Hafeez/Bloomberg

Parvez Ghias, chief executive officer of Indus Motor Co. Close

Parvez Ghias, chief executive officer of Indus Motor Co.

Close
Open
Photographer: Asim Hafeez/Bloomberg

Parvez Ghias, chief executive officer of Indus Motor Co.

“Their pricing power is being hit by inflation and fiscal limitation,” Invisor’s Tariq said. “The government is in the middle of a financial crunch, the farmers are focusing on rising fertilizer expenses, and individuals can no longer afford a 2- million rupee car anymore on an average salary. In fact, anybody earning 100,000 rupees a month cannot even think of buying a Corolla anymore.”

Farmers and government servants account for 35 percent of Corolla sales, Tariq said.

Indus’s new small car may attract individual buyers willing to spend 1 million rupees, Ghias said. The company is holding negotiations with Toyota and its affiliate Daihatsu Motor Co. about the new model, he said.

“Daihatsu specializes in small cars, Toyota medium sedans and then up,” he said. “In the next few months, some strategy will emerge.”

Indus, which has a domestic market share of 25 percent, is also preparing a new Hilux SUV, to be introduced in the fiscal year starting July 2012.

“If it is our ambition to become the No.1 player in this country, then we would need to capture 40 percent of the market share,” Ghias said. “We’ll use our own cash to expand.”

Indus’s full-year profit fell 20 percent to 2.7 billion rupees on higher costs, according to an Aug. 24 filing to the Karachi Stock Exchange.

To contact the reporter on this story: Khurrum Anis in Karachi at kkhan14@bloomberg.net

To contact the editor responsible for this story: Naween Mangi in Karachi at nmangi1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.