As Pakistan aims for emerging-economy status, its automotive industry is already motoring along at a healthy clip. Annual passenger car sales recently topped 200,000 units for the first time, and all of the country’s automakers are planning production increases to satisfy brisk domestic demand.
New players are also flocking to this market of 200 million, lured by government incentives and the opportunity to tap a growing middle class. For now, there may be enough growth to go around, but these new faces — which include the likes of Renault of France and Kia Motors of South Korea — could threaten the dominance of Japanese makers.
Pakistan saw a record high of roughly 218,000 passenger cars sold in fiscal 2016, which ended last June. The leader was Pak Suzuki Motor, a subsidiary of Suzuki Motor, which landed an order from the eastern province of Punjab for 50,000 cars. The province’s government plans to use the vehicles as taxis as part of a job-creation program.
Indus Motor, a joint venture between Toyota Motor and local conglomerate House of Habib, is doing well with its mainstay Corolla, reporting that sales grew 11% on the year to 65,000 in fiscal 2016. “The market is so brisk that production can’t keep up,” said Indus Motor Vice Chairman Toshiya Azuma.
Azuma expects even more growth to come. “Demand in India, our next-door neighbor, is about 4 million cars [including commercial vehicles] a year, so annual sales of about 600,000 cars is well within reach in Pakistan.” The country has a population one-sixth that of India.
Stocks climbed Wednesday as Wall Street posted a second straight day of gains in the new year and the Dow once again approached the 20,000 milestone.
The Dow Jones industrial average ended up 60 points, or 0.3%, to 19,942.16. The blue-chip index rose has come close to topping 20,000 several times in recent weeks but each time it gets near has pulled back. The Standard & Poor’s 500 index rose 0.6% and the Nasdaq composite index gained 0.9%. Both the S&P 500 and Nasdaq are near their record closing highs.
Stocks maintained their gains following the release of the minutes from the latest Federal Reserve meeting that provided clues to why policymakers raised interest rates in December for only the second time since 2006 and forecast three rate hikes in 2017 instead of the two moves previously anticipated.
Fed officials said they might have to raise interest rates faster than anticipated to prevent rapidly falling unemployment and President-elect Donald Trump’s proposed fiscal stimulus from fueling excessive inflation, according to minutes of the Fed’s December 13-14 meeting.
Benchmark U.S. crude was up 1.8% to $53.24 a barrel in New York. It lost $1.39 on Tuesday.
An alliance between Toyota Motor and Suzuki Motor could be a boon to both sides, helping the former gain ground in emerging markets such as India and giving the latter the engineering needed to compete in an increasingly high-tech industry.
Can’t go it alone
The two automakers said Wednesday they were discussing collaboration on environmental, safety and information technology.
Although Toyota President Akio Toyoda told a new conference that the idea of an alliance came together in just two business days after Suzuki Chairman Osamu Suzuki got the ball rolling, there is more to the story. Suzuki’s next partner had been the subject of speculation since August 2015, when the Japanese maker of economy cars ended a capital and business relationship with Germany’s Volkswagen over management conflicts.
Though Chairman Suzuki had said publicly that his company would look to remain independent going forward, another senior executive had acknowledged that collaboration was “necessary” in some fields. Even in India, a successful market for Suzuki, environmental regulations are growing tougher, making investment in technology like hybrid drive systems essential. Rising incomes have also stoked demand for higher-end vehicles in such countries.
Finding a big automaker ally was seen as essential for Suzuki to ensure a presence in self-driving cars. While a Toyota or a Volkswagen has the financial strength to counter the challenge posed by Google and other tech giants in this field — Toyota’s annual research and development budget comes to around 1 trillion yen ($9.59 billion) — Suzuki, which spent just 130 billion yen on R&D in the year ended March 31, hardly stands a chance alone.
Suzuki Motor Corp. Chief Executive Osamu Suzuki said Wednesday he will step down as CEO over a scandal involving the use of an improper fuel-economy testing method.
During a news conference, Mr. Suzuki said he will decline to be re-elected CEO at a shareholders meeting later this month. He said he will stay on as chairman.
Suzuki Executive Vice President Osamu Honda will also step down to take responsibility for the auto maker’s use of a testing method that wasn’t approved by Japanese regulators.
“I apologize once again for the trouble we caused,” Mr. Suzuki said.
Last week, Suzuki said it used a testing method that wasn’t approved by Japanese regulators on 26 models. It previously said 16 models were affected. It maintained that it had no intention of inflating mileage. The company had said results from tests using an approved method showed no significant difference in fuel economy.
Suzuki said it submitted Wednesday details on measures to prevent the recurrence of the problem to the transport ministry, and said it will be cutting executive salaries to take responsibility.
In measuring the resistance that a car faces from tires and air to calculate fuel economy, Suzuki has said that about 2.14 million vehicles sold in Japan were affected.
Shares in Suzuki have bounced back a day after the Japanese automaker said its fuel testing methods have not complied with domestic standards for more than five years.
Within the first hour of trade on Thursday, Suzuki share were up 6.1 per cent, but had traded as much as 7.8 per cent higher. It was a big enough jump to put it among the top performers on the Japanese stock market, but not enough enough to recoup the 9.4 per cent drop yesterday, and the stock had been down as much as 15 per cent when the news broke.
Suzuki, Japan’s fourth-biggest carmaker, found after an internal probe that its testing methods had not complied with domestic standards since 2010. The company will refrain from revising its figures, saying the gap in the performance of its vehicles was small, at less than 5 per cent. The news affects all 16 of its models sold in the Japanese market, or more than 2.1m vehicles.
Japan’s equities benchmarks were up about half a percentage point.
Toyota Motor and Suzuki Motor have begun talks on a tie-up, looking to take advantage of each other’s know-how and capitalize on demand for compact cars in India and other emerging economies.
Suzuki, which sells 2.79 million vehicles a year globally, drives Japan’s minicar market alongside Toyota group company Daihatsu Motor. Its strengths include low-cost vehicle production. It boasts a 40% share of the Indian passenger-vehicle market, a major profit source. Suzuki’s robust sales network, built up over three decades, would likely be a major asset to Toyota as it expands its Indian operations.
While Toyota set up a production arm in India in 1997, the results have been lackluster, with its market share at just 5% or so. The automaker aims to use the partnership with Suzuki to gain a firmer foothold in areas of greater Asia outside its existing stronghold, which includes Thailand and Indonesia.
Toyota tops the global automobile market with annual group sales of some 10 million vehicles. It is a leader in safety technology, including self-driving cars, as well as eco-friendly vehicles such as the Prius hybrid and Mirai fuel cell car. Environmental and safety regulations are expected to tighten worldwide. With integration of information technology becoming essential to the industry, Suzuki likely aims to take advantage of Toyota’s next-generation technology.
Suzuki and the Toyota group will discuss the potential partnership from a variety of angles, with cross-shareholdings a possibility.