Atlas Honda

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REPORT ATLAS HONDA GROUP MEMBERS Umair Ayub Bilal Farooq Saad Mazhar Naveed akbar Gilani Mukhtiar Ali Asadullah Iqbal

Transcript of Atlas Honda

Page 1: Atlas Honda

REPORT

ATLAS HONDA

GROUP MEMBERS

Umair Ayub

Bilal Farooq

Saad Mazhar

Naveed akbar Gilani

Mukhtiar Ali

Asadullah Iqbal

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Automobile industry

The auto market is one of the largest segments in world trade. The annual size of

automotive export trade in the world has grown to a massive level of over US$ 600 billion, which accounts for about 10 per cent of the world export. Changing

models, improving fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto

industry in a fast globalizing world. Hence there is a need for exploring the industrial complementarities in the region for better quality, favourable costs, fuel

efficiency and attractive designs. Therefore, the requirement of information exchange in the region is much more pronounced now than ever before for keeping

the auto industry afloat and competitive.

Pakistan Overview

Since its independence in 1947, Pakistan has been able to transform itself to a large

extent, from a completely agrarian economy to a fairly developed techno-industrial base. Besides textiles, Pakistan’s exports are largely manufactured items such as consumer durables and engineering products. However, it is also a fact that

Pakistan has not been able to realize its potential due to internal and external compulsions and thus it lags behind many developing countries of the world. The

following economic indicators constitute the tell-tale of Pakistan’s development performance:

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Automobile Industry of Pakistan

The existing population of automotive vehicles in Pakistan is 3.9 million. The

annual demand is estimated at 300,000, two thirds of which is being met from local sources and imports and the remaining one third is left unmet. The market value of

automotive vehicles in dollar terms is estimated at more than 1 billion, out of which import constitutes around US$ 200 million. The aftermarket of auto parts is

estimated at US$ 500 million, imports and local production taken together. Production figures of automobiles are given in the following tables:

Pakistan’s strength of production elements lies in its vast reservoir of land, labour and even capital. But technology and purchasing power of the consumers are its

major weaknesses. Technology requirements are being met by joint ventures and technology tie-ups with foreign players in automotive sector. Japanese, Korean and

European entrepreneurs have invested almost US$ 1.5 billion in Pakistan’s automotive sector. The local investment in the automotive sector is approximately US$ 1 billion.

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KARACHI PLANT:

Atlas has undertaken to develop local manufacturing capabilities to the highest, economically feasible level. While a major role in localization has been assigned to

vendor industries, Atlas has the country’s largest in-house manufacturing capability at its Karachi and Sheikhupura plants. To support the production

facilities, the company has established an R&D wing and tool making facilities through CDA & CAM, which are growing rapidly in size and function as the

company expands. Atlas has managed to execute 14 Joint Venture/Technical Assistance Agreements between local vendors and foreign manufacturers for

transfer of technology.

Atlas Honda is playing a pioneering role in creating conditions for easy and confident use of motorcycles all over the country. A vast and growing network of

over 1600 motorcycles sales service and spare parts dealers has been established. In order to back up this system, Atlas has set up Technical Training Centers in

Karachi and Lahore, which provide several courses of varying duration and complexity for motorcycle mechanics and users each year. Mobile training

facilities take the latest know-how, technology and maintenance of motorcycles to major rural and urban centers around the country.

Vision

Market leader in the motorcycle industry, emerging as a globally competitive

centre of production and exports.

Mission

A dynamic, profitable and growth oriented company through market leadership, maximizing export and excellence in quality and service; to ensure attractive

returns to equity holders; reward employees according to their ability and performance; to foster a network of researchers and engineers ensuing unique

contributions to the development of the industry; customer satisfaction and protection of the environment by producing emission friendly green products and

to remain a good corporate citizen fulfilling its social responsibilities in all respects.

Our slogan

For Honda to remain Honda, and for everyone to realize their aspirations, we must

believe in "The Power of Dreams"

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Company History

Since its inception the company has experienced an unprecedented growth in its

operations from a small manufacturing company to the leading motorbike manufacturer of Pakistan. Following is the chronological order of the major events

in the company's history.

2009 Contribution to national exchequer reached Rs. 3.18 billion - 72% of wealth generated, out of Group 7.56 billion (1.48%

of the Government total revenues). LPDC project completed (New Generation Of Technology). Stared implementation of

GDC & Case Damper Production Projects through Showa Corporation, Japan. Launch 500 K Capacity Expansion

Project. 2008 Major re-adjustment of prices to pass on the benefits to

customers. Best Corporate Report award by joint committee of ICAP & ICMAP. Achievement of landmark sales of 100,000 motorcycles. Technical agreement with Keihin

(Japan) for Mgf. Of Fuel Cock Assembly. Switch Assembly Light & Winker + Ignition Coil.

2006 Deletion level reached to 87% and 80% for CD70 & CG125 respectively. Introduction of Gratuity Scheme for staff. Best

Corporate Report award by joint committee of ICAP & ICMAP.

2007 Concept of 5S dealership - Sales, Service, Spare Parts, Second hand exchange and Special (Credit) sales launched.

New Block for hi-tech engine plant. 2005 Investment in Crankshaft Project. TC Agreement with Toyo

Denso. 2004 ISO 9002 certification for both factories. 2003 New models (MMC) of CD70 & CG125 launched. 2002 Investment in Gear Project. 2001 Exports to Bangladesh. Export Agreement signed with

Honda Motor Company Limited. 2000 Mr. Kawamoto President, Honda Motor Company Limited,

visited AHL. 1999 Change of name to Atlas Honda Limited (AHL). 1998 Inauguration of CG125 Engine Project at Sheikhupura

Factory. 1997 Merger of Panjdarya Limited into Atlas Autos Limited.

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1996 Export of built up motorcycles to Nepal. 1995 Production capacity expansion III. Joint Venture agreement

signed with Honda Motor Company Limited. 1994 Inauguration of CD70 Engine Project at Karachi Factory. 1993 Technical Assistance Agreement with Showa Corporation. 1992 Deletion Project financed by PICIC. 1991 Commercial Production started at Panjdarya Limited.

Production capacity expansion II. 1990 Incorporation of Panjdarya Limited as Joint Venture with

Honda Motor Company limited. 1989 Production capacity expansion I. 1988 Public offering of Shares. 1987 Commercial Production started. 1986 Technical Assistance Agreement signed with Honda Motor

Company Limited. Incorporation of Atlas Autos Limited.

Management:

Maintaining a global viewpoint we are dedicate to supplying product of the `highest quality yet a reasonable point for worldwide customer satisfaction. Honda

remains its rich culture of customer satisfaction, it being serving nation. For management we have following our management strategy.

· Proceed always with ambition and youthfulness.

· Respect sound theory, develop fresh ideas, and make the most effective use of time.

· Enjoy your work and encourage open communications.

· Strive constantly for a harmonious flow of work.

· Be ever mindful of the value of research and endeavor.

· Respect for all – man has priority over others.

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Threats

· Chinese cheaper products challenges.

· Free Trade & WTO.

· Strong competition from competitors in near future.

· Instability of Government.

· High rate of Taxation.

· Bad infrastructure.

. Input raw material especially steel prices, rubber and petroleum products.

Cost of Production

The company has best plant of the world; it enables it to produce more products which cover the people needs by adopting concept of “Cost Effectiveness”.

Technology

As technology upgrade the quality of goods increases. That’s innovate products

which creates more demands thus resulting more supply.

External Environment Factors

Natural hazards and disasters badly damage product delivery and production process which results in less supply. We have seen recently the earth quack which damaged the market.

Government Policies

Government policies are always favorable for the Market leader in Pakistan. Which take its supply to peak.

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Future expectations

Company is excepting strong competition with its competitors especially cheap

bikes of china. In future they want to overcome the market so they will increase their supply.

Taxation

Government has imposed huge tax on Atlas Honda Company. It is estimated that company pays 35 % annual as Tax to government. This huge tax increases the

production cost which reduces its Supply.

CIRCULAR FLOW OF INCOM AND PRODUCT

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Condition of Honda in Product Market

Atlas Honda is the leader in motorcycle industry. It is selling three products named

as CD 70, CG 125 and CD100 respectively. CD 70 and CG 125 are old brands while CD100 was launched on 11 October 2004 in Lahore on 13 October 2004 in

Karachi.

MOTORCYCLE MARKET V/S HONDA MARKET SHARE

It has market share of 56 % currently. It is the biggest manufacturer of motorcycles in the country. Last year it produced 1,90,395 bikes. It means company achieved 62 % growth in production. Now according to the increasing demand and market it

has doubled its production capacity. The market size for two wheeler segment was around 340,000, while demand for Atlas Honda touched 230,000. Parts of bikes

are being manufactured 85 % locally.

Last year an investment of 4 billion has come in the motorcycle industry, form that Atlas Honda invested 2.5 billion alone. Honda is a popular brand in the market and

people want to buy it because of its quality, durability, after sale services and good resale value. In the motorcycle industry Honda has become an aspiration group for

those who have some other brand.

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Competitor

Brands

In Pakistani motorcycle industry Honda is a leader. Although there are 50 brands of bike are available yet many of them have not got recognition among the people.

All these exist in different segments of markets.

Yamaha

It is a basically two stroke 100 CC motorcycle. It is very popular in villages because people consider it more durable and a smooth driving bike on rough roads.

It is second second largest selling brand of Pakistan.

Sohrab

It is first Pakistani brand that was introduced. First time it introduced heavy bike

look in a four stroke and 70 CC motorcycle. Its price is low as compare to Honda but. It is not direct threat for Honda. But to some extent people like it because it is

rapidly increasing its quality, after sales services and resale value. It is getting popularity in villages.

Suzuki

It is third selling brand in Pakistan and it also targets the villagers. Its image is also

approximately same as Yamaha in the mind of people and it also targets the village areas.

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FINANCE

The Company has strong financial position. The year 2005-06 was a good year;

The Company undertook several major projects which were executed in a timely and cost efficient manner. The sales revenue grew to Rs. 17.42 billion. This

represents an increase of 23.37 % as against the previous year’s Rs. 14.12 billion. In the financial year 2007-08, your company continued to build on the successes of

the previous year by selling 360,108 units as compared to 287,184 units in the corresponding period of 2007 which shows 25 % growth.

The gross profit margin for the period slightly decreases to 9.35 % from 9.52 % of

the corresponding period. This was largely due to unprecedented rise in raw material prices and utility costs. However, the net impact has been more or less

offset by an increase in sales, volume, benefits of localization and efficient fund management.

Operating Expenses

The operating expenses increased to Rs. 528.32 million as against Rs. 445.27

million for the same period last year. This escalation was in line with the increase in sales and the launching of new CG-125 deluxe, a premium model. The increase

in interest rates and additional borrowing for capacity expansion and new projects led to an increase in financial expenses to Rs. 151.61 million. The company had

budgeted this rise feels comfortable with the current capital structure ot finance its growth. The company earned ever highest profit before tax of Rs. 1,047.06 million

as against Rs. 905.63 million for previous year a bottom line growth of 15 %.

Govt. Expenditures

The company paid taxes to national exchequer amounting to Rs. 5.034 billion

which are higher ever. On account of sales tax, income tax and custom duties as against Rs. 4.5 billion contributed last year. Payment of these taxes was more than

7.5 times the net after tax earning. The company’s contribution to the national economy by way of value addition this year amounts to 7.04 billion 71.46 % of net receipts from operations 13.6 % higher as compared to last year.

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Cash Flow:

The cash flow generated through the operating activities was Rs. 543.86 million in

2008 as compared with Rs. 1489.11 million during 2007. Net income after tax increased to Rs. 676.83 million in 2006 from Rs. 597.12 million in 2005, reflecting

higher volume and growth on impact of Localization.

The positive cash flow during the year was mainly deployed for capital expenditure (Rs. 2,125.86), debt repayment (Rs. 231.98 million).

Conclusion:

The reduction in tariff rates liberalization and global image of Pakistan has resulted in substantial growth in foreign investment and exports. At the same time, there are

significant challenges that can be a threat if not addressed timely. The company is faced with a great cost increase problem due to the continuous rise in input raw

material especially steel prices, rubber and petroleum products.

The year 2005-06 turned out much as planned, although the task was made harder by the burden of global raw material price hike. Next year will be a difficult year

for the country economy. The business environment and the economy are becoming more open and the business environment more difficult. The automobile

industry policy of deletion and “forced” localization have been abandoned by the government. The implications are severe i.e. “survival of fitness”. In this environment, competitiveness is the key success factor. However, your company is

well positioned in terms of capacity & efficiency. Barring any unforeseen economics adjustment, Atlas Honda should maintain its growth momentum. There

is excepted strong competition from Chinese and its Japanese competitors. So Honda should recover from its internal and external expenditures hence it would

reduce cost of production. Customers will buy more Atlas Honda in case if price still low.

It is strongly believed that under WTO agreements the developing countries’

economies will be seriously affected. The auto industry, and especially the motorcycle industry, is poised for growth. The results speak for themselves. This is

the time to further nurture the industry otherwise a great opportunity to diversify the industry will be lost to the country.