Eco Assignment.pdf

Introduction: Atlas Honda Limited is a public listed company which was incorporated on October 16, 1962. It is a joint collaboration between Honda Motor Company Limited Japan, the largest and most reputed motorcycle brand in the world, and Atlas Group, one of Pakistan’s most renowned business conglomerates. The Company is principally engaged in progressive manufacturing and marketing of motorcycles and spare parts. Atlas Honda Limited is the largest motorcycle manufacturer in Pakistan with the strongest brand value and highest customer loyalty. The Company is considered a pioneer of motorcycle industry in the country and has been leading two wheeler market successfully for over 50 years. The Company currently has a production capacity of over 1.35 million units per annum and continues to maintain its status as market leader both in terms of volume and quality. It also exports its motorcycles and spare parts to Bangladesh and Afghanistan. With highest quality products, state of the art manufacturing facilities, largest dealership network & impeccable after sales service, Atlas Honda Limited is today considered a benchmark for two wheeler manufacturing. It has been proudly and successfully fulfilling its role as the flag bearer of motorcycle industry in Pakistan.

Products Launched: The company grew when it first launched CD70 in 90s which is still in demand and every year, a new model of CD 70 launch. There are various products in markets now a days which includes CD 70, Pridor, CG 125, CB 125F, CB 150F. And now company planned to launch CB 250F soon.

Research: We conducted a research on CB 150F which was launched last year in 2018. The bike was slated for a positive response just like Honda’s 70cc and 125cc bikes which have been trendsetters in the industry. However, its availability has become a serious issue as the bike is not available in the showrooms of the authorized dealers in Karachi. Some of the dealers in Karachi are asking the customers to book Honda CB150F (Rs159,000) after displaying just one piece in their showrooms. The delivery, which the dealers are promising, can be taken in 45 days tentatively. However, some of the other dealers are forcing customers to pay Rs180,000 – Rs21,000 more apart from the original price – therefore worrying them that Honda may upsurge the price in the future. The customers are

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asked to pay the remaining amount upon delivery. While speaking to Dawn, a dealer said that despite crazy demand for Honda CB150F, Atlas Honda Limited (AHL) is not supplying the bike. He said: “The company has given only two to three bikes to every showroom. Now it is asking us to stop taking advance booking of the twowheeler” There could be two reasons for the possible shortage of the bike:  AHL is completely failing to meet the customer’s demand  Authorized dealers are deliberately creating fake shortage in order to get hefty premiums for on-the-spot deliver

Increase in the Production: It is significant to state that Atlas Honda has increased the production capacity from 750,000 units to 1.35 million units a year. The decision was taken following the accomplishment of the second production line at its Sheikhupura plant. The overall production of Atlas Honda bikes increased from 674,851 units in 2016-2017 to 798,640 units in 2017-18. Pakistan Automotive Manufactures Association revealed these figures.

Analysis: Equilibrium price: As the year passes, new model are being introduced by the company and the demand increases with every new model. So when demand increases, the equilibrium price also increases. The demand increase this year mainly because of consumers’ taste. We found out that Honda bike was liked by the majority of the population, even by those who can’t afford it, in a survey. Less Supply: Because of the very high demand in urban like Karachi or Punjab, The supply reduces with every model and so the company has to increase production units every year. This time with CB 150F model, the demand was too high and dealers of the showroom said that the company didn’t supply much units to complete people’s demand. Substitutes and Income Effect: When price is increasing every year, then the income effect is there. Only high income people can buy this bike and the other whose income is low should go for the substitutes. The substitutes are other bikes models in the market e.g. superpower which is cheaper than Honda. So these other bike companies are the competitors for Honda and they affect their sales. Complements: The complementary goods also affect the purchasing power of consumers. When there is a surge in the prices of petrol, the fuel consumption of Honda bike is very efficient which means people prefer the Honda bike only. Resource Price: Since steel is a major input in manufacturing bikes, Chinese steel prices for instance between April-17 and Feb-18 grew by 23 percent. With US imposing tariffs on steel from China and other countries, there may be a supply glut in the market from China that could result in a fall in global steel prices but that's just one view. This will remain a concern for Honda.

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Seasonal Effect: The report said that, just a week before elections, there were certain reports that motorcycle sale rate is going down in Pakistan because the people were investing more in property and gold etc which hindered the motorcycle sales. So in that type of season when Fluctuation occurs in gold prices or stock market, then the demand is affected. So before CB 150F, the demand was not good but with this new model the company again made a place in market. AHL assembled and sold 960,460 units in last months of 2018, so hit a new peak.

How we did Analysis: 

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We found the information of shortage from the Dawn News website where the report said that the model CB150F is short because of high demand and because of that the price is increased by showrooms. The information we get about increase in production is from another website where the company itself mentioned about their plans after the shortage. Luckily, we met with the Operation manager of Honda, M. Furqan Khan. We asked few questions from him regarding effects and shortage.

The first question, we asked was about the news of shortage which is published by dawn news. He answered the same as dawn news mentioned about the shortage. The 2nd question was about the effect of price. We mentioned his answer above in the analysis part (equilibrium price). The 3rd question was substitutes, income and seasonal affect. He told us about substitutes and income effect, which we described above in the analysis part. The seasonal effect was not clearly mentioned by him because it was related to elections although we analysed that during the elections, consumers were investing money in gold and stock market so maybe because of that, the demand went down at that time. Some of the Informative things he told us by himself was; 

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The company doesn’t increase the price too much for the same model, which is produced every year, because of the competitors. Because of the smuggling of resources, some other companies manage to produce bikes in low cost so because of that, Honda’s demand went down that’s why normally for the same model the company kept the price almost unchanged even as rupee has depreciated. The price change is only for the new model. The company is going to file a case on some showrooms because of the black marketing. The company identified some of Karachi showrooms where they hide the new model bikes for every time and then sell them with high price.

Conclusion: In the conclusion, The Honda is one of the most reputed brand. Atlas Honda Limited is the largest manufacturer of bikes in Pakistan. The urban cities have a big demand of Honda bike because of its brand image and quality. The most famous brand model is 70cc which still has market demand although the company has introduced several new models throughout the years. The recent model is CB150F in which we analysed that because of the high demand, there was the shortage of the bikes in showroom. According to the media, it maybe because of AHL supply or the fake dealers. 3|Page

Well, the company manager told us that it is true that because of the demand the shortage faced in the market and the company then increase their production. After all the research, we analysed that the demand of Honda is pretty good and because of that the equilibrium price is much higher as compared to other company’s bikes. The bike is most needed thing in Pakistan because there is a big ratio of people who can’t afford 4 wheeler (apart from this project, the manager of Honda said to us, “After Parents, there are two most important things for middle class citizens of Pakistan, one is Mobile Phone and 2nd is bike”). So there is an income effect which means the people who have high income can buy easily, otherwise they go for the cheaper substitutes. The company works very smartly, because they know about their cheaper competitors. They keep the price almost same for the same model every year, and increase the price with new launched product. Well, we would recommend that the company should have a view on those dealers who are using Honda bikes for black marketing. The company should cut the cost of bikes to compete other companies. And finally they have to increase the production in the upcoming years and for maintaining the demand they need to make the bike affordable for everyone.

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