Set against Indus Motors’ (PSX: INDU) long standing dominance in volumes and profitabilityis the meteoric rise of one rickshaw maker, Sazgar Engineering (PSX: SAZEW) that has thrown every prior knowledge about the industry’s dynamics into a loop.
In the quarter of June-25, Indus Motors sold more than 4 times as many vehicles as Sazgar, but generated less than twice the new comer’s post-tax earnings.
Despite commanding a far greater share in the market, and enjoying a long running loyalty from customers with the Japanese Toyota brand behind it, Sazgar’s closeness to the company’s sheer size and earnings potential must be a source of much chagrin. If nothing else, Sazgar’s enviable margins, driven by premium pricing and tighter cost controls, do provide a contrast.
Sazgar’s advantage is evident in unit economics where it earned nearly Rs9.8m per vehicle, compared to Indus’ Rs5.9m while keeping costs per unit in check. Now these numbers might be slightly skewed as the company continues to make rickshaws and a portion of the revenue must be contributed by rickshaw sales. Nevertheless, the gross margin and net margin corroborate with the unit-difference in revenues and costs. These levels are unmatched by peers. Indus Motors by contrast operated on gross margins of 13 percent with a likely heavier exposure to input costs and a mix of vehicle sales ranging from sedans to SUVs.
By September however, this gap began to narrow.Post-tax profitability was still roughly double that of Sazgar, selling 3 times the volumes as the latter. The company sold a higher share of Fortuner and Hilux in total volumes, attaining a higher average revenue per unit and thus improved its quarterly margins from June’s 13 percent to 17 percent. Earnings are decidedly up.
This should not overshadowSazgar’s own performance whose profitability and volumes grew 27 percent each. The company maintained its margin discipline as the market leader stood close on its heel. In Dec-25, Sazgar’s maintains (and in some instances, improved) its financials, if not improves them from previous quarters and net margins have only inched down slightly. Indus Motors is yet to publish its December financials, but it is clear that with volumes of nearly 11K, the company will retain its market position.
Honda Atlas Cars sits perhaps too comfortably between these two companies. Volumes have rebounded sharply in the quarter ending Dec-25 but profitability continues to lag. Unit performance has remained weak compared to peers and the company’s margins are stuck at 8 percent with net margins slipping to just 2 percent. Despite growth in the topline, the company is simply not making enough profits.
Even though Indus Motors with its larger base is clawing its back in terms of margins through scale and pricing power, Sazgar’s per unit profitability is unmatched. Honda meanwhile has not been able to translate its decently growing volumes into meaningful earnings. If Suzuki was still listed on the PSX, it would have provided a deeper analysis of volumes and profitability. Chinese assemblers appear to have an edge—they are launching bigger vehicles at prices they know the market can absorb, and justify the per unit costs because of the premium prices they are able to charge.
Sazgar probably will never compete on volumes, and the model still works. Legacy assemblers have to work that much harder now with competition knocking on their doors as newer models enter the field. Legacy will not be enough.