Morris Garages (MG) has started the inning Afridi style in a car market that is used to Misbah’s. MG soft launched its compact SUV – which it calls sneak peek - and without a formal launch, it has already booked around 500-700 cars, and counting. Earlier Kia got lucky in SUVs market, and now it is MG’s turn. Nishat Hyundai seemingly missed the powerplay. The game of new entrants in SUVs is not over yet; Malaysian Proton is also on the way.
Pakistan car market is not growing. But a replacement from Sedan to SUVs/crossovers is taking place. In US and China, SUVs share is over 50 percent in the car market. In India, SUV share has grown from 10 percent to 36 percent in 8 years. SUV’s in Pakistan is less than 10 percent and it is a no brainer that this market segment must grow once the consumers have choice.
‘We are going to spoil car consumers with options”, confidently said an MG Pakistan official. Earlier, Lucky Motors understood the game and took risk to have the first mover advantage; whereas Nishat adopted Japanese style of supplying on demand and are losing the initial steam due to low investment in the first stage.
MG is making an informed decision to have a late mover advantage. Earlier the company’s thinking was to launch CKD/SKD (domestic assembling) by June 21; but seeing the plant’s bottlenecks of Hyundai and forecast of supply chain disruption of Kia, MG Global changed its strategy for Pakistan to flood the market with CBUs (imported cars) till the time it starts local production.
Interestingly, under the automotive policy 2016-21, an assembler can import one hundred CBUs of a model at reduced duty structure to test the market. MG is clearly going to import much higher number for its MG HS 1.5 litre Turbo and will pay full duty. After paying over 100 percent in taxes and duties, launching price of Rs5.5 million for front wheel drive doesn’t add up.
Someone is clearly bleeding here. It is a marketing strategy to probably lose money to take the share. It is poles apart from Hyundai’s game plan where the idea is to be profitable from the day one by keeping low inventory. Kia was aggressive by making higher investment in initial stage to have higher numbers of locally assembled units from the start. MG strategy is even bolder. The idea is to capture the market before the start of assembly. Let’s hope, the company consolidates after the initial exuberance.
Competition is beautiful. For the last three decades, three Japanese players cornered the market with very few options. Same models were run for over a decade. Very few new models were launched. There was dearth of SUVs and there was no crossover. Change was being resisted. But not anymore. The market is flooding with options.
Some of the new players have alternate approaches. The decision makers in three Japanese companies are the principals, and they see the local market from Japanese lens. Kia and Hyundai are launched by strong domestic groups. They are contract manufacturers and are not married to principals. Here, Lucky’s strategy is to focus on SUVs, and they are in talks with a European manufacturer to diversify.
With MG, Chinese are entering into the market. It is pertinent to note that MG is not a Chinses brand per say. It is a British automotive brand owned by SAIC (Shanghai Automotive Industry Corporation). In Pakistan, SAIC is the decision maker – as is the case for Japanese makers. However, the Chinese strategy is poles apart. The thinking is to grab the market; profits are a mere after thought at this stage. Earlier, China Mobile disrupted the telecom market where consumers were a clear beneficiary as a result.
Launching MG HS is just a start. The real game is going to be in EVs. That technology is going to be the winner. In 1990s, Japanese were the kings. Now Korea and China are aggressively moving forward. Japanese think for long before making decisions. Chinese are quick in making decisions. That is how markets are disrupted.
Globally, in EV market, Japanese are lagging. Chinese and Koreans are ahead. MG’s eyes are on capturing the EV market. EV policy is in the making and will soon be announced. Once that is done, MG will launch its ZX EV in Pakistan. Apart from this, another crossover is going to be introduced at a price of Rs4 million. Kia is also coming up with similar price and specs’ cars before June. These two will give tough time to Sedans - Corolla, Civic, and Elantra – to be launched by Hyundai in the same price range.
The question is how sustainable MG’s model is and how serious are the sponsors. The local group has two generational ties with Chinese. They introduced Haier around two decades back and the brand has established its position in the white goods market. The car business is a different animal all together. The assembly plant is in process of development in Lahore with a capacity of producing 40,000 cars a year. The company has plans to add 10-11 dealers’ network across all the metropolitan cities. The company claims that its after sale service would be the USP, just as banks relationship managers offer services to their clients. This could be very different from existing model. Interesting times are ahead.