Vehicles Manufacturer in Paistan

Hino Motors, Ltd. commonly known as simply Hino, is a Japanese manufacturer of commercial
vehicles and diesel engines (including for trucks, buses and other vehicles) headquartered in Hino-
shi, Tokyo. The company is a leading producer of medium and heavy-duty diesel trucks in Asia.

Hino’s model in 2nd decade of 20th century

Background:
Hino Motors is a large constituent of the Nikkei 225 on the Tokyo Stock Exchange. It is a subsidiary
of Toyota Motor Corporation and one of 16 major companies of the Toyota Group
he company traces its roots back to the founding of Tokyo Gas Industry Company in 1910. In 1910
Chiyoda Gas Co. was established and competed fiercely against incumbent Tokyo Gas Company fighting
for gas lighting users. Tokyo Gas Industry was a parts supplier for Chiyoda Gas but it was defeated and
merged into Tokyo Gas in 1912. Losing its largest client, Tokyo Gas Industry Co. broadened their
product line including electronic parts, and renamed itself as Tokyo Gas and Electric Industry TG&E and
was often abbreviated as Gasuden. It produced its first motor vehicle in 1917, the Model TGE "A-Type"
truck. In 1937, TG&E merged its automobile division with that of Automobile Industry Co., Ltd. and
Kyodo Kokusan K.K., to form Tokyo Automobile Industry Co., Ltd., with TG&E as a shareholder. Four
years later, the company changed its name to Diesel Motor Industry Co., Ltd., which would eventually
become Isuzu Motors Limited.
The following year (1942), the new entity of Hino Heavy Industry Co., Ltd. spun itself out from Diesel
Motor Industry Co., Ltd., and the Hino name was born. During World War II, Hino manufactured Type 1
Ho-Ha half-track and Type 1 Ho-Ki armored personnel carrier for the Imperial Japanese Army. Following
the end of World War II, the company had to stop producing large diesel engines for marine applications,
and with the signing of the treaty, the company dropped the "Heavy" from its name and formally
concentrated on the heavy-duty trailer-trucks, buses and diesel engines markets, as Hino Industry Co.,
Ltd. The company took its name from the location of its headquarters in Hino (日野市 Hino-
shi) city within Tokyo prefecture.
To sharpen its marketing focus to customers, in 1948, the company added the name "Diesel" to become
Hino Diesel Industry Co., Ltd. In 1950 the heavy-duty TH10was introduced, equipped with the all-new 7-
liter DS10 diesel engine. An eight-tonner, this was considerably larger than existing Japanese trucks
which had rarely been built for more than 6,000 kg (13,230 lb) payload.
In 1953, Hino entered the private car market, by manufacturing Renaults under licence, and in 1961 it
started building its own Contessa 900 sedan with an 893cc rear-mounted engine, and a pickup truck called
the Hino Briska with the Contessa engine slightly enlarged and installed in the front with rear wheel
drive. The Italian stylist Giovanni Michelotti redesigned the Contessa line in 1964 with a 1300 cc rear-
mounted engine. Fed by two SU type carburettors, this developed 60 hp (44 kW) in the sedan and 70 hp
(51 kW) in the coupé version. However, Hino ceased private car production very quickly in 1967 after
joining the Toyota group. In 1963, the Hamura factory began operations, and focused entirely on
commercial truck and bus manufacture.
Hino Trucks have also been assembled in Portugal and in Canada.

Current Production Rate in Pakistan:

P akistan’s Motor Vehicle P roduction: P AMA: Bus: Hino data was reported at 22.000 Unit in
Oct 2018. This records a decrease from the previous number of 30.000 Unit for Sep 2018.
P akistan’s Motor Vehicle P roduction: P AMA: Bus: Hino data is updated monthly, averaging
43.000 Unit from Jul 2005 to Oct 2018, with 160 observations. The data reached an all -time
high of 108.000 Unit in Aug 2016 and a record low of 4.00 0 Unit in Dec 2017. P akistan’s Motor
Vehicle P roduction: P AMA: Bus: Hino data remains active status in CEIC and is reported by
P akistan Automotive Manufacturers Association. The data is categorized under Global
Database’s P akistan – Table P K.B009: Motor Ve hicle P roduction: P akistan Automotive
Manufacturers Association.
Hino Pak:
HINO) is a popular name in the commercial vehicle segment of the automotive industry and a
market leader in light and heavy commercial vehicles assembling buses, trucks, prime movers
and special purpose vehicles. The latter is used for hauling a variety of supplies, such as food,
equipment and machinery. Hino has the biggest assembling capacity in the segment with two
plants of 6000 and 1800 units of chassis and body manufacturing, respectively. According to
numbers reported by Pakistan Automotive Manufacturers Association (PAMA), the company's
share in the trucking segment has remained between 40- 45 percent. In FY18 however, Isuzu for
the first time recorded slightly higher truck sales than Hino. In the bus segment, Hino has started
facing competition from Master Motors but remains comfortably ahead in the segment. The
company has a strong Hino brand, a vast dealership network and after sales services support and
it also exports to the Middle Eastern and African countries.

Hino was established in 1986 by UAE-based Al-Futtaim group and PACO Pakistan through a
collaboration of two Japanese companies Hino Motors and Toyota Tsusho Corporation (TTC). In
1998, PACO Pakistan and Al-Futtaim disinvested in the company leaving the two Japanese
companies (Hino Motors Japan and Toyota Tsusho Corporation) to take over control.

Together the Japanese partners own 89 percent of the shares of the company with Hino Motors
being the holding company since 1998. It held over 59 percent of the shares as at Mar-18 while
Toyota Tsusho held nearly 30 percent in the period. Only 10 percent of the company's shares
were held by the general public and financial institutions.

Financial and operational performance (year ending March)

Despite being a market leader, Hino's two production facilities for chassis and body
manufacturing are not functioning at their maximum capacity. Even though, the chassis assembly
plant has been operating above 50 percent since 2016 (up to 70 percent in 2018), the body
manufacturing plant with a nameplate capacity of only 1800 units has lately been barely
producing 400-500 bus bodies. Capacity utilisation was 26 percent in 2016 which grew to 28
percent in 2018. But this is a function of demand since the company has maintained a strong
market share in the segment despite lower volumes. In the past, during 2012 and 2014 and 2015,
capacity utilisation was 59 percent, 35 percent and a decent 84 percent respectively.

Local bus demand has fluctuated significantly. Higher imports, less organic demand, higher
usage of passenger cars and motorcycles for inter and intra-city travel, the launch of new mass
transit projects in Islamabad and Lahore may be some reasons for demand slowdown.

The company claims that its only commercial vehicle assembling company to have an advanced
body manufacturing facility as well as chassis, so underutilising its existing capacity is a shame.
Hino could think about expanding its export or becoming part of the Hino global value chain.
This would also open doors for Hino to expand further and cater to a much wider market.

Its other major product is chassis, which are the lower part of the vehicle, consisting of the frame
on which the body of the trucks is built. This is where Hino gets over 90 percent of its revenues.
This segment has grown significantly over the years as production grew closer to the capacity. In
addition, the company has also been making Hilux frames for Indus Motors Company. Since
2016, Hilux frames have doubled and speak for the rising demand for Indus' pickups.

The company has been investing back to upgrade and modernise technology. Revenue stream
has been diversified through the sales of Hilux frames, bodies, spare parts, and others while the
company also exports chassis and bus bodies though export volumes are not available. Revenue
has steadily gone up since 2012 as truck sales improved (see graph). The doubling of Hilux
frames has also shored up revenue growth.

On the costs side, though the company procures parts locally, it does depend on imported raw
materials and parts. When commodity prices such as steel go up, costs of production for local
auto parts makers' rise which in turn raises prices for automakers. Similar is the case with
currency depreciation. During 2018, the company incurred an exchange loss of Rs637 million
against Rs51 million the previous year. However, despite higher costs, prices were not raised by
the company as such. As computed, revenue for chassis per unit only grew by 4 percent in that
year. Margins dropped from 15 percent in 2016 to 11 percent in 2018. These have continued to
decline in the current marketing year for the company.

Opportunities and outlook in the commercial segment

Demand has become a real dampener for Hino since marketing year of 2019 kicked off in April-
18. In the nine-months ending Dec-18, the company demonstrated a 16 percent drop in revenue
brought forth by a 25 percent drop in truck sales. In a great turnaround, bus sales grew by 34
percent, though they could not cushion the blow to profits because of their volumetric
insignificance. The beating that the truck segment has been taking led to a 48 percent drop in net
profits. Margins fell from 12 percent to 6 percent in the nine-month period. Restriction on non-
filers to purchase vehicles, market being flooded with old and used trucks, higher diesel prices,
and lower demand coming from the logistics industry at large has all affected truck sales.
Still the revenue per unit went up by 5 percent which means what was sold fetched better prices
but decline in demand ultimately came to bite back. The rupee depreciation (27 percent since
Dec-17) led to much higher costs of import inputs which resulted in the fall in margins and the
slight increase in prices did not help much. Another reason may be the demand for the market
shifting toward Chinese vehicles, which are better priced and the rise of new truck importers
entering the space.

Adverse foreign exchange rate and upward movement of commodity goods could bring costs of
production up, while the rise of used and resold trucks in the market could continue to curb the
demand for fresh vehicles. Going forward, regulatory oversight and the implementation of the
transport policy may result in replenish of fleets by fleet managers and logistic companies which
may result in higher truck sales. Market players argue that truck demand will balloon
substantially once the CPEC routes are fully functional. This is something truck assemblers are
banking on, and new investors have been eyeing as well. Hino is in the midst of it, though the
competition will get a lot more intense.
HionoPak Business:

Hinopak Nine Months Ending Dec-18

Million Rupees
Sales 15,389 18,342 -16%

Cost of Sales 14,454 16,204 -11%

Gross Profit 935 2,138 -56%

Distribution 281 302 -7%

Administrative 313 306 2%

Other income 132 244 -46%

Other operating expenses 0.97 108 -99%

Finance cost 821.72 233.56 252%

Profit (loss) before tax (349) 1,434

Taxation 244 466 -48%

Profit (loss) after tax (593) 967

Earnings (loss) per share (Rs) (48) 78.01

GP margin 6% 12% -48%

NP margin -4% 5%