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Turnaround in Hinopak

August 04, 2014


HINOPAK Motors Limited posted its highest-ever after-tax profit in FY2013-14 as a result of teamwork of professionals and skilled workers, but guided and directed by its young managing director. Placing full confidence in his team, he has set another challenging target for the current year.

He took over as MD and CEO of Hinopak when the country was in a recession. The company had suffered huge losses for two years, and its finances were in a shambles, sales were down 24pc, and running expenses were soaring. It was at this critical point that sound leadership, proven strategies and strong implementation transformed it into a robust body.

A candid discussion on various issues with the firm’s managing director and CEO (whose name is not quoted because of security threats, as requested) regarding Pakistan’s auto industry, specifically the heavy commercial vehicles segment, are summed up as follows.

‘The auto industry technology is changing on a fast-track, and if you want to be part of this changing world, you should upgrade the industry. Otherwise you can’t survive’

Q1. Hinopak Motor’s corporate philosophy is to contribute to the development of a more prosperous and comfortable society by providing a new set of values. Could you briefly tell us how have you put this mission into practice?

Ans. Our corporate philosophy is based on the principles of customer satisfaction, employee development, progress of the community, and value for shareholders. A few of our best practices are:

• We are a leader in introducing latest technology; providing reliable, comfortable and environment-friendly products and total support to customers

• We respect fundamental human rights at the workplace and provide opportunities to employees for professional growth

• Help the nation in its hour of need, be it during floods and earthquakes and through other welfare projects. Contribute towards economic development through transport revamping schemes, localisation of imported material and timely payment of taxes and duties

• Provide scholarships to NED University students (the university selects the students), besides giving financial assistance and support to company management staff and workers who want to enhance their educational level

• We participate in various sports activities via sponsorship, and have been organising the KCCA inter-firm cricket tournament on a regular basis since 1990 • Our CSR activities include the revamping of the SITE Model School.

Q2. Hinopak claims that it is the first automobile firm in Pakistan to export buses to the Middle East and Africa. What is the position now? And what is the segment’s export potential and the economics of exports?

Ans. Hinopak Motors Ltd (HPML) exported 250 buses in the early-1990s to Middle Eastern and African countries. After that, there was a big gap due to the entry of Chinese, Korean and Indian products in the market on a price factor. We pulled ourselves from that arena as price is not the only factor; our products are far ahead in quality and specifications.

Upon request of our old customers, we again exported over 70 buses to these countries. Currently, our products are running and we are closely monitoring their performance and trying to fill the gap where necessary.

We are very much confident that we may get a sizeable share in the overseas market. There are lot of opportunities there, as overseas customers want good quality, best prices and timely deliveries; and we are capable to meet their requirements. The only question is regarding a consistency in official policies. Here, we need support from the government for uninterrupted production, especially for exports.

There are two aspects to the economics of exports: either you have a sizeable export market so that your domestic production is not hampered due to polices and other factors that go against the industry, or your domestic market has good volumes and stable conditions for smooth operation of exports with small volumes. Unfortunately, we don’t have either. We are trying to stabilise domestic operating conditions to continue our export activities smoothly, as this is a matter of commitment.

Q.3. How is the indigenisation process progressing, and is it impacting local prices?

Ans. Indigenisation is the only tool for success and survival in this competitive market, which is very price-sensitive. HPM is committed to expanding localisation, and its policy is to induct new models with more local parts as compared to the discontinued ones. There is a misconception that localisation is only possible if the customs duty on our products is higher, and I want to clear that. Our products have duty ranging from zero to a maximum of 10pc, and our achievement on various models is in the range of 40pc by value. Through localisation, we reduce our product cost, provide additional jobs, and pave the way for the transfer of technology.

For rapid localisation, government policies are very important. My only request to the government is to freeze the polices for at least the next five years, and stop importing used vehicles without any age limits, as volumes play a pivotal role in furthering localisation. The domestic market is very small, and if used commercial vehicles take a sizeable share in meeting domestic requirements, chances of expanding localisation become very slim.

Q4. What would be the impact of opening up of trade with India in the HCV segment?

Ans. Your industry will be affected, as it is volume-driven. Volumes play a vital role in setting the directions. India has an edge in volumes, availability of raw material and consistent policies regarding importing of used vehicles. We don’t have any of these. Most important is the fragile relations between the two countries, and any incident may stop the entire process. For them, the Pakistani market is very small and they may absorb such an impact, but we can’t. So I suggest that we move forward, but slowly and cautiously, taking one step at a time and continuing the journey.

Q5. What are your perceptions on the domestic bus and truck market? Are they tempting enough for fresh investment and transfer of new technology?

Ans. Keeping in view the expanding market size over the next few years due to various upcoming projects announced by the government in areas like power, dams, motorways etc, further expansion and investment are justified. But please note that the auto technology is also changing on a fast-track, and if you want to be a part of this changing world, you should upgrade the industry. Otherwise, you cannot survive.

So fresh investment is not only linked to the market size,but the time factor as well. We are taking care of this aspect for our own survival and for the good of the people of this country by providing good quality products, while using updated technology.

Another factor which determines the investment options is the law and order condition in any country, and Pakistan is no exception. So this is another area which forces us to make a decision either in favour or against investing in expanding our operations. But in the long run, I can see light at the end of the tunnel. I must say the future of the auto industry in the country is bright.

Published in Dawn, Aug 4th, 2014