Brief review on auto, cement and energy sectors.

The automobile industry in Pakistan includes companies involved within the production/assembling of passenger cars, light commercial vehicles, trucks, buses, tractors and motorcycles. The current market structure of the industry is concentrated. It is largely dominated by Japanese players: Toyota, Suzuki and Honda. The three players have deep rooted presence in Pakistan. FAW is a new addition to the sector. In Pakistani market, Suzuki Motors enjoys largest share of over 55% followed by Toyota (25%) and Honda (20%).

New assemblers have already started their production activities, especially within the car segment. However, these newcomers as well as the incumbents face a testing period as the economy is going through a low economic growth phase. In order to integrate these entrants in the domestic market and also to insulate the automobile industry from the excessive effects of economic cycles and import compression, a number of structural improvements are needed. These include:

(i) Increasing the localization content in automobile assembling;

(ii) Providing a level-playing field in the sector by doing away with protective policies; and

(iii) Addressing market frictions in the auto financing business.

With new assemblers starting production and existing ones unwilling to reduce the prices despite low demand, the margins are expected to remain under pressure. The outlook remains tenuous to negative.

Cement

Pakistan's cement industry is split in two regions: North and South. North comprises of KPK, AJandK and Punjab. South region comprises of Sindh and Balochistan. In the North zone there are 13 listed companies whereas the Southern zone has 6 listed companies. The total installed capacity of the North Region as on January 2020 is 53.127 million tons per annum whereas, the total installed capacity of the South is 16.404 million tons per annum. Both regions have their own demand and supply dynamics. Players of the Southern region, benefit from greater export market availability given their geographical proximity to the sea; providing room for revenue diversification. Local demand growth in Northern region remained higher due to China-Pakistan Economic Corridor (CPEC) and other government related infrastructure projects.

The profit margins of the Pakistani cement...