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Thursday, June 1, 2023

Honda predicts tough times for auto industry in the future

The company expects carnage in sales with a 25-35 percent decline in August 2022 due to price hikes, delivery delays, and production cuts. However, that percentage will likely decline to 30 due to high-interest rates, the automaker predicted.

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Earlier today, Honda Atlas Cars Limited (HACL) conducted an analyst briefing where the company’s financial results and potential were discussed.

A 25–35 percent fall in sales is what the corporation anticipates will occur in August 2022 as a result of pricing increases, supply delays, and production reductions. It stated that consumer finance accounts for 40% of its overall sales. However, the manufacturer forecast that due to high financing rates, that number will probably drop to 30.

Read more: Kia, Honda and Suzuki might stop production in Pakistan

Tough times lie ahead

HACL claimed that the US currency rate increases are mostly to blame for the price increases. It was noted that raw commodities account for 90% of overall costs, with dollar rate swings affecting 60–70% of them. At the time of the price increase, the USD/Rs exchange rate was 235.

Only two non-production days (NPDs), according to the carmaker, have been recorded thus far. According to a provision from the State Bank of Pakistan (SBP), the company is allowed to import 50% of the average CKD import for the previous four months in July, 60% in August, and 70% in September.

Read more: All you need to know about the new Honda ZR-V

Pakistan’s diminishing foreign exchange reserves are expected to be protected by the clause. These were some of the other conversation highlights:

  • The levels of localization in all Honda cars are as follows:
    • Honda BR-V — 50 Percent
    • Honda Civic — 60 Percent
    • Honda City — 70 Percent
  • In terms of absolute amount (PKR), HACL’s localization level stands at 60 percent.
  • The company is expanding its localization efforts to reduce production costs and increase profitability.
  • HACL spoke on the impending launch of the new HR-V in Pakistan soon, without mentioning the exact timeline.

Read more: Why did Honda increase its car prices?

Due to rising transportation costs and the current status of the Pakistani rupee, HACL also forecast a drop in future profitability.