Overpriced, substandard vehicles have been the essence of Pakistan’s oligopolistic automobile industry. The seasoned auto triangle – Atlas Honda, Indus Motors, and Pak Suzuki Motors – treasured overwhelming market dominance over the years in the wake of feeble local competition. The limping sector never bothered the authorities much, which manifested in a lack of stimulus to incentivize the new-entrants to the industry. Consequently, the citizens unwillingly got along with inferior, watered-down cars.

The industry continued to blossom on false grounds for a prolonged time. The car assemblers never felt the need to get equipped with state of the art technology. Besides, the safety requirements were disregarded by these motor companies owing to a lack of competitive pressure. Despite an imported alternative, most consumers preferred these local cars because of expected ease in their maintenance.

However, the opening of new entrants of late has changed the fate of the industry. Under the Greenfield Investment category of Automotive Development Policy (2016-2021), Hyundai Nishat Motors, Kia-Lucky Motors Pakistan Limited and United Motors Private Limited set up assembly-cum-manufacturing units in Pakistan. It became imperative for them to focus on globally popular models, cost minimization, fuel efficiency, and user comfort enhancement to remodel the market fundamentals. And they did not disappoint.

Kia-Lucky Motors laid the foundations of disruption by launching their SUV, Sportage, a year ago in August 2019. They spotted a niche in the modestly priced, compact SUVs which the consumers whole-heartedly welcomed. The success of Sportage paved the way for the introduction of the Hyundai Tucson recently. With a promising launch that saw bookings filled to the brim, Tucson – like Sportage – is anticipated to fare well.

The traditional Japanese auto assemblers exhibited a conservative mind set by remaining content in the Sedan market. But Kia-Lucky Motors dared to transform the traditionally prevailing norms of the automobile sector. It is the only market participant to absorb the currency shock when other players augmented their prices twice since its launch. Even Hyundai didn’t wait a day for a considerable price hike as the demand of Tucson rose up. This may give Kia an edge over the others.

On the other hand, despite the negative impacts of the Covid-19 lockdown on Pakistan’s economy, experts see light at the end of the tunnel for the automobile industry. “Industry analysts have painted a positive outlook for the auto industry in the upcoming years, predicting around 17% rise in demand for cars in 2021 and 24% in 2022,” stated an OLX report on vehicle category.In comparison to FY20, the volumes are estimated to be 35% higher in FY21, said Taurus Securities auto analyst Nabeel Dochki in a comment to The Express Tribune. He pointed out that searches for KIA cars have also been reported (at 2%) on the platform. The figure was low because the company was launched recently and has fewer used cars in the market at present, he said.

According to a report, online trading of automobiles shot up during Covid-19. When the lockdown was imposed across the country, the trading of various automobiles, mainly cars, surged to a new level following prolonged closure of showrooms, markets and weekly bazaars.

Buyers of cars and dealers utilized online platforms for trading new and used vehicles including cars, motorbikes, rickshaws and tractors. In the past six months alone, automobiles worth Rs61 billion were sold on one single platform, the study revealed. The values are estimated on the basis of demand price whereas there is room for negotiation between buyers and sellers. Vehicles are the second most popular category on the online platform with approximately 100,000 ads actively listed from all over Pakistan on any given day.

From cars, rickshaws and buses to tractors and boats, the category also offers auto spare parts as well as car accessories. On any given day, the most ads posted in the car category are from Punjab ie around 32,000 followed by Sindh with 15,000, Khyber Pakhtunkhwa with 6,000 and Islamabad with 5,000. Similar to the trend that is presented by daily ads, Karachi boasts of most buyers visiting the platform with 19,038 customers followed by Lahore with 15,168 buyers.

The government has a responsibility to support the transition in the dynamics of the automotive industry. They can incentivize the sector by imposing meaningful duties on imported vehicles if the local players embrace an economical pricing strategy. But one thing is for sure, this change is here to stay. With the progress of time, other new companies will gate-crash the industry resulting in cut-throat competition for market share. This will see a positive trickle-down effect on vehicle prices.

Suppose you want to enter in an agreement with a Chinese company to launch small cars in Pakistan. For this purpose you have already researched the market and you are preparing for its launch in November 2021.

Q1) Create customer persona for this car.

Q2) Select the most suitable pricing strategy for this company. (Strategy with reason)

Also write down the positioning statement for this brand in Pakistan.

Q3) Examine how a startup company could develop R&D, and product development capabilities by collaborating with other firms. Which firms your company should select for collaboration and why.

Q4) Highlight the issues and challenges (any 4) confronted by established companies in the face of changing market conditions and customer demands.