Pakistan Reader# 213, 25 September 2021
Expanding population base with limited urban space necessitates the use of two-wheelers
Ankit SinghThe “Asia-Pacific Two-Wheeler Market Report 2021: Historical Analysis 2015-2020 & Forecasts 2021-2025” observes that Pakistan is the fifth largest market of two-wheelers in the Asia-Pacific. For a lower-middle-income country with an expanding population, the motorbike becomes the preferred mode of travelling especially due to ever congesting limited affordable urban centres, which have expanded sporadically but the narrow streets remain locked in time and glory. A two-wheeler motor vehicle with its lightweight and high manoeuvrability becomes leisure in its own manner for traversing the cities and towns for middle-class people, the motorcycle is the very basic need of the household. Covid pandemic somehow pushed the population of Pakistan to buy more two-wheelers as public transport could not operate. With the onset of electric vehicles, the affordability factor has been reduced much further.
Background
According to the available data provided by Pakistan Automotive Manufacturers Association (PAMA), one can see a steady rise in domestic production capability in Pakistan. For the year 2019, the net bike production of units in Pakistan was 18,81,000, explaining that the graph below is largely pointing to two-wheeler production trends. The segment wise data is hard to quantify but being aware of the average population and its income levels, one can assume that the indigenous two-wheeler industry is self-sufficient and has the potential to compete with its counterparts in Africa and elsewhere. Before 2004, nobody could have ever thought that the Pakistan motorcycle industry would flourish at such an exorbitant scale. In those years the market volume was below 0.1 million annual units and two companies only (Atlas Honda and Dawood Yamaha) were operating in the market. Suzuki and Qingqi held minor shares.
Figure 1 Source: PAMA historical data
To have more clarity about the consumer segments and their affordability, one may compare 150 CC bikes from India and Pakistan. Suzuki GS 150 for example costs around USD 1,141.50 whereas the Bajaj Pulsar in the same engine capacity category costs around USD 1,327.66 (All the conversion done at current market exchange rates with respect to Dollar). A difference of almost two hundred dollars for a middle-class consumer is a big scale.
Moving on to the famous and most sought after two-wheelers bike brands in Pakistan, Atlas Honda Limited occupies the top rank with its CD70 as the most sought-after bike in the emerging middle-class consumer segment. With more than 50% market share the company is offering seven regular models and two sports models having annual sales of almost one million units. Other famous brands are Suzuki Motorways Pakistan Motorcycles, Yamaha, Superpower Motorcycles, Ravi Motorcycles, Super Star and United Auto Motorcycles. United Motorcycles offers one of the cheapest motorcycles in the segment of 70CC bikes, US70 CC latest model is selling for as low as USD 270 only.
The market leader Atlas Honda Limited (AHL) broke its own records by selling 116,000 units in the month of October 2020 alone. Honda CG125 is a decades-old model which is produced from Sheikhupura Plant in Punjab, trucks loaded with CG125 are sold out on the same day. United Auto Motorcycles and Road Prince bike sales have also been rising steadily.
In fact, the government of Pakistan had passed the Automotive Development Policy 2016-21, which has reaped in fruits for consumers and availability along with innovation. There has been a shift to larger localisation in terms of production of units, whereby earlier the engine and other raw materials were imported and then a unit was assembled in Pakistan. This year is the concluding year of the policy and the trends have been positive and promising. There are almost 3000 Auto Parts-Manufacturers operating all over Pakistan, whereby this industry has created almost 3 million jobs and opportunities for respectable income, engaging around 500,000 skilled workers as Direct Employees and 2.4 million indirect employees. It has generated a robust Investment volume of USD 2.18 billion and contributes revenues of USD 310 million per year to the national exchequer.
With the advent of electric bikes, the prospects of the two-wheeler industry have added another dimension to it in terms of a larger customer base. To reduce vehicular emissions, the government has introduced the Electronic Vehicles (EV) Policy 2020-2025 which entails various tax incentives to promote EV manufacturing in Pakistan. However, electric vehicles have a tendency to turn the auto industry obsolete as the engine and other mechanical parts may no longer be required with a simple replacement by battery. An engine manufacturer in Pakistan will pass on the loss of market to aluminium suppliers, casting industry and other related sectors associated with engine production. It will be important to see how Pakistan will traverse the agenda of mobility versus manufacturing dilemma. As per the latest development, the SBP has banned banks from extending credits/loans, to buy imported vehicles to curb inflation and imports.
References
Aamir Shafaat Khan, “Bikes blooming market,” Dawn, 23 November 2020
“Electric motorcycles,” Dawn, 15 July 2021
Taimoor Hassan, “Two Wheeler Industry of Pakistan,” Emerald Taimoor, 7 February 2021Sonia Karamat, “SBP bans banks from giving loans to buy imported vehicles,“ Samaa, 24 September 2021
“Economic Survey of Pakistan, Chapter 14, Transport and Communications,” Finance Ministry, Government of Pakistan
“ Production & Sales of Vehicles- Historic,” Pakistan Auto Manufacturers Association
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