Realising the potential of automobile sector in Pakistan, SMC Japan began to gradually increase its shareholding in Pak Suzuki following the deal; initially its equity stake was 12.5 percent. When Pak Suzuki got privatised in 1992, the Japanese giant acquired additional shares from PACO to boost its shareholding to 40 percent and took over the management. As of 2014-end, SMC Japan owns nearly three-quarters of PSMC.
Operations The firm is rightly the pioneer of the auto industry in Pakistan. The company has come a long way from the industry's nascence period in 1980s. Pak Suzuki has the largest automobile assembly facility in Pakistan; it can produce 150,000 units per annum as compared to a capacity 50,000 in 1992. The company also has the largest dealers' network (sales, service and spare parts) in Pakistan. By the end of 2014, Pak Suzuki had a total of 86 dealerships in 38 cities.
Pak Suzuki specialises in small and medium-sized cars, with many of the vehicle models on its assembly lines being those retired internationally. Being a producer of relatively inexpensive cars, the company faces massive demand in both urban and rural Pakistan. Pak Suzuki Company also designs and manufactures motorcycles, commercial vehicles and outboard motors.
Recent financial performance In the first nine months of CY15, PSMC saw its car and light commercial vehicle sales jump 64 percent to over 97,000 units. In the same period, the industry-wide volume grew at 56 percent. Consequently, Pak Suzuki's share in the market jumped to 58 percent in the category, as compared to 55 percent in the similar period last year. In monetary terms, the auto giant reported sales of Rs 61 billion - up 49 percent year-on-year.
Much of the sales hike in the period was due to Suzuki's involvement in Bank of Punjab's "Apna Rozgar Scheme." Nearly a third of its volumes, or 32,041 units to be precise, were associated with this scheme. Order of another 50,000 Suzuki Bolans and Ravis is expected to be completed by February 2016.
In the motorcycle and three-wheelers category, however, the situation is opposite. In 9MCY15, Pak Suzuki sold 16,241 units - a year-on-year decline of 13 percent as compared to the industry which grew 13 percent. PSMC's share in this market segment has dropped to under 3 percent. Strong competition from a host of players, especially in terms of pricing, has made life difficult for PSMC's motorcycle division.
Profitability has been the most impressive area for the auto behemoth. PSMC's after-tax profits soared to Rs 4.2 billion in the first three quarters of 2015, from Rs 1.6 billion in the year-ago period - a staggering 163 percent jump. Better efficiencies and a weaker Japanese yen contributed towards improved margins.
From a net margin of 0.5 percent in CY10 and 3.6 percent in CY14, Pak Suzuki saw a big jump in the three quarters of CY15 to 6.9 percent. Similarly, gross margins have increased from 7.8 percent in CY14 to 13.8 percent in 9MCY15. The company's stellar performance lately has been reflected by its share price. The stock, which traded at sub-Rs 200 levels in early 2014, is currently valued at around Rs 500. In 2015 as well, PSMC shares rallied around 30 percent compared to the benchmark index which closed roughly flat. Outlook for automakers looks bright as well. Numerous car financing and insurance schemes coupled with declining interest rates plus low fuel costs are some of the factors aiding car manufacturers in Pakistan.