Porters Five Forces Analysis of Automotive Industry in Pakistan and Bangladesh

There are only three major passenger car assemblers in the market; Pak Suzuki, Indus Motors and Honda Atlas. Pak Suzuki has a almost complete monopoly in the small car segment as it faces almost no competition other than the single odd Diahatsu Cuore produced by Indus Motors.

In the Subcompact Sedan segment Toyota Corolla, Honda Civic, Honda City, and the Nissan Sunny are currently the only cars in production. There are still no locally made SUV, Mid or Full sized sedans available. New market entrants: Since Pakistan’s automotive sector has experienced a huge growth rate, many local and foreign auto brands have installed their assembly plants in the country.

These companies includeAdam Motor Company which has the privilege of designing and manufacturing Pakistan’s first home grown (mass produced) car known as Adam Revo (short for revolution), Dewan Kia Motors with their newly launched Kia Picanto, Dewan Hyundai Motors with Pakistan’s all time favourite Hyundai Santro Club, Toyota Motors of Japan with their Vitz, Honda Motors of Japan with their Jazz , Nissan Motors of Japan with their Nissan Micra , BMW Motors of Germany with their 1 Series and upcoming Pak Hero Motors (a subsidiary of Pak Hero Motor Cycles) with Pak Hero Type 1.

Substitute products and services: Pakistan has not adopted any automotive emission or safety standards. Therefore, most cars manufactured and sold in the country are still carburettor based and do not meet any international emission standards. Many locally made cars such as Suzuki Mehran, Suzuki Cultus, Suzuki Ravi, Suzuki Bolan, Diahatsu Cuore, etc are globally obsolete cars from the 1970s or 1980s which are no longer produced or sold in any country other than Pakistan. So there has been no major substitute to these vehicles and their monopoly was not affected at all.

A good and comfortable public transport may be a substitute if available. Customers: In Pakistan context there are 9 cars in 1,000 persons which is one of the lowest inthe emerging economies which itself speaks of high potential of growth in the autosector and more so in the car production. Rising per capita income with changing demographic distribution and an anticipated influx of 30 to 40 million young people in the economically active workforce in the next few years provides a stimulus to the industry to expand and grow. Suppliers:

Through previous years the world prices are rising and causing costly inputs and Pakistan has left with scarce Steel and Iron left, so manufacturers are facing difficulties in producing cars with low prices. The auto parts industry is generally faced by multiplicity of taxes; the presumptive tax regime has led to increase in prices of imported inputs and the finished goods. Component manufacturers are struggling to compete with under-invoicing, misdeclaration and smuggling. Import of used parts is still continuing at a large scale.

Smuggling, under-invoicing and dumping of auto parts. Energy crisis and law and order situation are major problems faced by Pakistan automobile industry. Automotive Industry in Bangladesh: Bangladesh is the eighth most populous country and is among the most densely populated countries in the world. Bangladesh currently manufactures Auto rickshaw and locally designed three wheeler motor vehicle Mishuk with engine from Honda. Country has few large car plants which assemble Mitsubishi Pajero, Hino bus, Tata bus and motor cycles. Traditional Competitors:

Bangladesh has a small automobile industry with few companies operating. Each year Bangladesh imports like 300000 cars from around the world and growth of import is continuing. For a new company to operate in there will have to face following companies as their traditional competitors. * Pragoti * Hino * Tata New market entrants: Toyota, Mitsubishi and Tagaz are trying to get hold of Bengali auto market by introducing new and cost effective products to Bangladesh like Toyota introduced Yaris to the market and statistics proved it got great success in middle-class of country.

After the start of reconditioned cars reports show that Almost 90 per cent reconditioned cars used inside Bangladesh are imported from Japanese Toyota Company. Substitute products and services: In Bangladesh three wheelers and rickshaws are the substitute to cars for low income population. If available a good and comfortable public transport may be a substitute. Presence of less number of substitutes and alternatives is a great opportunity for new investors in this sector. Customers:

From the huge population of 150 million, growing middleclass has started spending money on luxury items. If the trend continues, It is hoped, Bangladesh will have big enough domestic market to make its own car. The car market seems to be growing at an incredible rate. Customers prefer the Japanese cars as they are reliable and easy to maintain. Not to mention their cheap spare parts and excellent customer service. If a company provide the customers with similar kind of reliable and cheap vehicles they will definitely switch towards that.