T R A N S A C T I O N S D E P A R T M E N T

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Emery Wilkins
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AUTO SPARE PARTS A u t o C a r e M a r k e t & T h e R i s e O f E - c o m m e r c e T R A N S A C T I O N S D E P A R T M E N T This document produced by the Punjab Board of Investment and Trade

Our Transactions Team compiled this document based on opinions and judgments, which may vary and be revised at any time without notice.

1 AUTO SPARE PARTS A u t o C a r e M a r k e t & T h e R i s e O f E - c o m m e r c e T R A N S A C T I O N S D E P A R T M E N T This document produced by the Punjab Board of Investment and Trade (PBIT) contains information from sources believed reliable; we do not guarantee that the matter is accurate or complete. Our Transactions Team compiled this document based on opinions and judgments, which may vary and be revised at any time without notice. This document is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell and is for information purposes only. It is published for the use of our clients and may not be reproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication. The views expressed in this document are those of Transactions Team at PBIT and do not necessarily reflect those of PBIT or its senior management. 1

Content Automobile Sector - The Global Outlook Booming Auto Industry of Pakistan Market Dominants Pakistan Imports Global Automotive Aftermarket Industry

2 Content Automobile Sector - The Global Outlook Booming Auto Industry of Pakistan Market Dominants Pakistan Imports Global Automotive Aftermarket Industry Auto Spare Parts a Forward Looking Industry of Pakistan Why To Invest In Auto Spare Parts? Market Classification Industry Globalization & E-commerce Sources

3 AUTOMOBILE The Global Outlook

In 2014, registrations topped 77 million, and by 2020, they are expected to be as many as $1.

Other region do contribute in the auto sector but the market size in negligible. 12 out of 21 auto giants belong to Asian markets. 3 are of USA and the rest of the 6 are from Europe.

China is the world's largest market, and the main contributor to the increase as 2017 sales rise by a forecast 40% to nearly 1.4 million units. The global light vehicle (LV) market grew by a strong 4.

4 In 2014, registrations topped 77 million, and by 2020, they are expected to be as many as $1.5 billion total vehicles in operation worldwide The auto industry is divided into 3 major regions Asia, USA and Europe. These 3 regions contribute 95%. Other region do contribute in the auto sector but the market size in negligible. 12 out of 21 auto giants belong to Asian markets. 3 are of USA and the rest of the 6 are from Europe. The global light vehicle market is heading for its eighth consecutive year of record sales in 2017, with forecast growth of 2.2% to 93.3 million units. China is the world's largest market, and the main contributor to the increase as 2017 sales rise by a forecast 40% to nearly 1.4 million units. The global light vehicle (LV) market grew by a strong 4.5% in 2016, following a 2.0% rise then previous year. The market reached a new peak of 91.3 million units, the seventh consecutive year of peak demand. During the first ten months of 2017, the growth rate is estimated to have slowed down to the range of 2-3%, as forecasted in last year's. Japanese car manufacturer, Toyota held the highest market capitalization of $ B. Second, third and fourth spot held by German car manufacturers Volkswagen ($ 108.9B) and Daimler ($ 86.43B) and BMW group($ 74.64B) and the 5 th player is Honda ($ 64.6B) respectively in FY 18. In Terms of $ value/per share Tesla has the highest value per share of $ 294. Second highest valued share is of Volkswagen at $ (Source: American Industrial Company) 2018 Punjab Board of investment and trade Transaction Department. All rights reserved.

5 BOOMING Auto industry of Pakistan

2018 Punjab Board of investment and trade Transaction Department. All rights reserved.

Japanese brands Toyota, Honda and Suzuki. All three players have a strong position in the market and have a strong in house investment in sheet metals and plastic components.

The present capacity of 3 car manufacturers in Pakistan 254,800 units in FY 16 and 17. There was no new production facility installed over the last two years.

6 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. UNITS IN THOUSAND PRODUCTION AND CAPACITY H O N D A T O Y O T A S U Z U K I H O N D A T O Y O T A S U Z U K I The local car market is dominated by Japanese brands Toyota, Honda and Suzuki. All three players have a strong position in the market and have a strong in house investment in sheet metals and plastic components. A brownfield project has been completed by Nishat group with South Korean car manufacturer Hyundai, to manufacturer cars in Pakistan by The present capacity of 3 car manufacturers in Pakistan 254,800 units in FY 16 and 17. There was no new production facility installed over the last two years. The vehicle produced were 227,230 units and 202,000 in FY 17 and FY 16 respectively. The Car manufactures operate at approximately 80% capacity. Only Toyota Indus Motor maintained a more than 100% capacity working on double shift to fulfill the consumer needs. (Source: PAMA) P R O D U C E D C A P A C I T Y. (Source: PAMA) 2 wheelers production sales 2/3 wheelers (Source: PAMA) Production Sales. (Source: PAMA) 4 wheelers / cars production sales. (Source: PAMA)

7 MARKET DOMINANTS

Unit in Thousands Unit in Thousands Unit in Thousands 200.0 180.0 160.0 140.0 120.0 100.

0 2014 2015 2016 2017 Suzuki Production Suzuki Sale Source: PAMA TOYOTA 70.0 60.0 50.0 51.

0-2013 2014 2015 2016 2017 Toyota Production Toyota Sale Source: PAMA 40.0 35.0 30.0 25.

8 Unit in Thousands Unit in Thousands Unit in Thousands SUZUKI Suzuki Production Suzuki Sale Source: PAMA TOYOTA Toyota Production Toyota Sale Source: PAMA HONDA Honda Production Honda Sale Source: PAMA

9 PAKISTAN IMPORTS Cars and other vehicles

10 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Units in USD Thousands Units in USD Thousands Unit in USD Thousand Units in USD Thousands Imports of Motor Cars 1.39Bn Import value of cars in value Import Value of Motorcycles Mn Import value of Motorcycle in Series Import Value Of Trailers & Semi Trailers Source: TradeMap 16Mn Import value of Trailers & Semi Trailers in Series Import Value Of Tractors Source: TradeMap Mn Import value of Tractors in Value Source: TradeMap

11 Global Automotive Aftermarket Industry is expected to Reach $722.8Bn by 2020 Source: V12 DATA

12 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Highlights Automotive industry has been witnessing a high growth which is laying exponential opportunities for the automotive parts industry. There are basically two types of market for auto parts manufacturing namely Original Equipment Manufacturing (OEM) and aftermarket. In OEM the auto parts manufacturing industry supply components to the OEMs which are the automobile manufacturers. Generally the aftermarket supplies of auto parts manufacturing is greater than its OEM supplies. The developed countries already have large vehicle population whereas the developing countries are increasing it with their growing per capita income and urbanization. During economic downturns the aftermarket sales of auto parts manufacturing increases as people tend to invest less on new automobiles and prefer to repair or replace their auto parts. The U.S. had 809 motor vehicles per 1000 person in 2011, while it was 572 for Germany. In Asia Pacific, Australia had the largest motor vehicles per capita with 717 per 1000 person. China became the world's largest consumer for motor vehicles, surpassing the U.S. in 2010; however the per capita vehicle population for the country remained low at 188 in This indicates a large nonpenetrated market for automobiles in the region. The international automobile companies are entering the Asia Pacific market in order to encash the growing economies in the region. Asia Pacific countries have large vehicle life as with their limited income automobiles remain as one of the important asset of their household. This favors the aftermarket supplies of automobile manufacturing market in the region as the people prefer to replace parts even for the old vehicles instead of buying a new vehicle. (Source: Persistence Market Research

13 AUTO SPARE PARTS A forward looking industry of Pakistan

14 Bilal Ganj or Bilal Gunj is a famous market in Lahore, Punjab, Pakistan, where mostly used vehicles parts are sold at comparatively low price. Bilal Ganj market is situated close to the shrine of the Sufi saint Data Ganj Baksh.

Pakistan An Emerging market for auto and allied industries The Industry plays an important role within the large-scale manufacturing sectors in spurring economic growth having enormous investment

15 Pakistan An Emerging market for auto and allied industries The Industry plays an important role within the large-scale manufacturing sectors in spurring economic growth having enormous investment opportunities with positive growth of 23.3% FY Pakistan is among the 40 automobile producing countries and 4 of the top 10 global car makers have plants in Pakistan. The overall performance of Pakistan Automotive Sector has not met its true potential. Although Motorcycle Segment has shown commendable results but the Car segment with few exceptions is providing lesser technology and features as compared to global market. Especially in small cars segment the technology still used has been phased out in the international market and the safety features like air bags and ABS Brakes etc. are not provided and most of the cars come with inefficient fuel technology engines. The money making policies of manufacturing are driving the customer towards low facilitates in high prices. Pakistan market is facing a mood disorder due to the ongoing behavior. The buyer behavior is shifting rapidly towards the imported cars especially the cars with the engine capacity of 600 cc. (Source: fp brecorder) *LAHORE AUTO PARTS RETAILERS 970 * Punjab Board of investment and trade Transaction Department. All rights reserved.

16 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. CURRENT INVESTMENT Rs6 Billion Treet invests Rs6 Billion in battery manufacturing plant The plant, a state-of-the-art manufacturing facility spread over 40 acres, is the result of Rs6 billion investment from Treet Corporation. Daewoo Battery is the only manufacturer of Lead-Acid batteries in Pakistan offering complete range of 100% Maintenance Free Batteries for Automotive and Specialized Deep Cycle Batteries for UPS and Solar Systems. These specialized batteries are designed to be fully compatible to Pakistani environment and manufactured using most advanced Korean Technology under direct supervision of Korean Experts. The blend of continuous innovation, advance technology and quality assurance measures provides best in class product quality and high performance of starting batteries for automotive. (Source: Daewoo Battery)

was constituted to represent auto motive parts industry.

who represent multinational companies of repute, including Toyota, Honda, Suzuki, Hino,

(Source: Pakistan Association of Auto Motive Parts & Accessories Manufactures) PAAPAM

17 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Pakistan Association of Auto Motive Parts & Accessories Manufacturers In Pakistan PAAPAM was constituted to represent auto motive parts industry. PAAPAM has under its wings part makers of Cars, Motorcycles, Tractors, Trucks and Buses, who represent multinational companies of repute, including Toyota, Honda, Suzuki, Hino, Nissan, Hyundai, etc. Investments in place in the industry now exceed US$ 1.5 billion. (Source: Pakistan Association of Auto Motive Parts & Accessories Manufactures) PAAPAM Represents over 350 TIER 1 Auto Parts Manufacture EXPORTS Current exports US$ 175 Million. INVESTMENT Current investment by PAAPAM members Rs. 200Bn

18 PREMIUM MEMBER OF PAKISTAN association of auto motive & accessories manufacturers 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. (Source: Pakistan Association of Auto Motive Parts & Accessories Manufactures)

19 Why to invest in auto parts?

Average age of vehicles on road hits 11.

auto care market Consumer are on the Rebound

Aging Cars are Still Driving Sales Consumers

(Source: V12 Data) Aftermarket Growth Trends

20 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Average age of vehicles on road hits 11.6 year (Source: V12 Data) Key trends in the auto care market Consumer are on the Rebound New Cars are Creating New Opportunities Aging Cars are Still Driving Sales Consumers Value Premium Innovation Leads to Growth (Source: V12 Data) Aftermarket Growth Trends (Source: V12 Data) (Source: V12 Data) (Source: V12 Data)

21 MARKET CLASSIFICATION

22 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Consumer are opting for premium value Dealerships lead the way in outlet share Premium Segments Dealerships Quick Lubes Premium Beam Wiper Blades Full Synthetic Motor Oil High Level Premium Spark Plugs Hybrid Wiper Blades Premium/Performance Oil Filters Full Synthetic HD Oil Performance/Extended Life Air Filters HID Capsules and Bulbs Auto Parts Manufacturing Market By Component Type Battery Cooling System Underbody Component Automotive Filter Engine Components Lighting Component Electrical Component By Sales Channel OEM Aftermarket Source: 2015 Emerging Car Care Trends By vehicle type Passenger Cars (PC). Light Commercial Vehicles (LCV). Heavy Commercial Vehicles (HCV). By Region North America Latin America Europe Asia Pacific MEA Source: 2015 Emerging Car Care Trends Repair Shops Tire Shops Source: 2015 Emerging Car Care Trends Products & Markets Supply Chains Key Buying Industries New Car Dealers Used Car Dealers Auto Mechanics Car Body Shops Car Wash & Auto Detailing Oil Change Services Consumers Key Selling Industries Auto Parts Wholesaling Products & Services Critical parts (new) Performance parts Maintenance parts Critical parts (used) Vehicle accessories Source: 2015 Emerging Car Care Trends

23 INDUSTRY GLOBALIZATION Auto care & rise of e-commerce

It s expected to account for $20 billion of aftermarket auto parts sales, accounting for up to 10% of the entire market.

dramatically. This rise in e-commerce has led to increased channel consolidation over the past decade, shifting the power balances in the industry.

24 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. E-Commerce & Direct Selling E-commerce is growing in both business-tobusiness (B2B) and business-to-consumer (B2C) marketplaces; by It s expected to account for $20 billion of aftermarket auto parts sales, accounting for up to 10% of the entire market. Because e-commerce effectively opens up the marketplace, making low-cost imports much more accessible to both the B2B and B2C sectors, aftermarket auto part competition has been increasing dramatically. This rise in e-commerce has led to increased channel consolidation over the past decade, shifting the power balances in the industry. Selling directly to end consumers and businesses through digital channels has also become more common, and will likely be the norm in the coming years as consumers come to expect easy and reliable automotive parts availability. (Source: Forbes) A recent Frost & Sullivan study identifies some of the trends in its just published study, The Future of Parts and Service Retailing in the Automotive Aftermarket. Here are some of the big issues that are expected to shake up the aftersales market around the globe within the next 10 years: The Rise of e- Commerce B2B Sales will be Battlefield Between Online Players and Traditional Distributors/Retailers Service Aggregation, Mobile Service Next-Gen Business Models. (Source: Forbes) Michelin buying 40% stake in French online tire retailer Allopneus, and then taking over British tire retailer Black circles. (Source: Forbes) U.S.-based service aggregator Open Bay launching an app that will detect vehicle maintenance issues through a plug-in device and then automatically send you repair quotes from local service garages. (Source: Forbes) French carmaker Peugeot eyeing online parts seller Mister Auto. (Source: Forbes)

25 Pakistan Among Top 10 Internet Economies in the World

The rapid rise of e-commerce, for instance, is presenting manufacturers with various challenges.

In Pakistan there is only one portal of e- commerce for Automotive and Auto parts.

26 2018 Punjab Board of investment and trade Transaction Department. All rights reserved. Ever going demand for parts and services Not all industry trends are beneficial to aftermarket auto part manufacturers, however. The rapid rise of e-commerce, for instance, is presenting manufacturers with various challenges. It s expected to account for $20 billion of aftermarket auto parts sales, accounting for up to 10% of the entire market. In Pakistan there is only one portal of e- commerce for Automotive and Auto parts. Around 16 million Pakistani citizens, who didn t use the internet before, went online for the first time between This is huge because this its almost half (47%) of the overall internet users in Pakistan. (Source: Pak Wheels) ABOUT Founded in 2003, PakWheels.com has become Pakistan's #1 Automobile Portal. Over the years, the website has helped millions of Pakistanis buy & sell cars, bikes, auto parts & accessories, read automotive reviews and news, check automobile prices and find solutions to all their automotive needs. 40 MILLION VISITORS 700 MILLION VIEWS USED CARS 800 THOUSAND CARS, BIKES & ACCESSORIES LISTED FORSALE BUYING & Spending trend NEW CARS 58% 38%

27 SOURCES TRANSACTIONS DEPARTMENT IN HOUSE PERSISTENCE MARKET RESEARCH RESEARCH AUTOMOTIVE AFTERMARKET INDUSTRY RELEASES/GLOBAL-AUTO-PARTS- TRENDS: MANUFACTURING-MARKET-TO-REACH-US- WHAT YOU NEED TO KNOW 466-BN-BY PERSISTENCE-MARKET- RESEARCH HTML OTIVE-AFTERMARKET/INDUSTRY-TRENDS FORBES V12 DATA A LOOK AT TRENDS AND STATISTICS IN THE AUTOMOTIVE AFTERMARKET TSINGH/2015/06/02/FUTURE-OF- INDUSTRY AUTOMOTIVE-AFTERMARKET-AND-CAR- SERVICING-CONSUMERS-WILL-HAVE-MORE- TRENDS-AND-STATISTICS-IN-THE- CHANNELS-TO-SHOP- AUTOMOTIVE-AFTERMARKET-INDUSTRY-2017/ AROUND/#6C F8 BUSINESS RECORDER /RETAIL05/ /AVERAGE-AGE-OF / VEHICLES-ON-ROAD-HITS-11.6-YEARS AUTO PARTS- LAHORE, PAKISTAN IBIS WORLD PARTS-CT120 TRENDS/MARKET-RESEARCH- PAKISTAN ASSOCIATION OF AUTOMOTIVE REPORTS/RETAIL-TRADE/MOTOR-VEHICLE- PARTS & ACCESSORIES MANUFACTURERS PARTS-DEALERS/AUTO-PARTS- STORES.HTML DAEWOO BATTERY NDP GROUP CONTENT/UPLOADS/2015/08/2015- EMERGING-CAR-CARE-TRENDS-AUG- 12_2015.PDF

28 ABOUT US Punjab board of investment & trade is a provincial trade and investment promotion agency established by the Government of Punjab in In today s global economy, trade and investment play an increasingly important role in generating means for transformative change. At PBIT, we strive to ensure that this transformative change is sustainable and more impactful. PBIT is committed to enhancing the global competitiveness of Punjab and its business. To this end, we work to attract new investments in the region and strengthen the existing ones by promoting local investment opportunities, facilitating businesses and highlighting the distinct advantages of Punjab as a business location. Incorporated under Section 42 under the Companies Ordinance of 1984, Punjab Board of Investments & Trade (PBIT) assists companies which intend to invest in the manufacturing and services sectors of Punjab. The wide range of services provided by PBIT include providing information on the opportunities for investments, as well as facilitating companies which are looking for joint venture partners. PBIT acts as Punjab's marketing arm and actively promotes the province worldwide as one of the best investment hubs in Asia. PBIT as Special Economic Zone Authority Punjab also evaluates the applications/proposals from Developers to declare their Industrial Parks as Special Economic Zones. For granting one time import duty exemption on machinery, equipment, spare parts, consumables in Special Economic Zones, PBIT is responsible to issue a confirmation Letter on the status of the applicant prior to seeking the permission from the relevant department/agencies to claim for the exemption. Investors are always encouraged to discuss their project interests with PBIT officers, wherein Information can be obtained on major public/private projects, prevailing sectoral policy framework, existing incentive regime, financing options, trade statistics etc. Punjab Board of Investment & Trade is a Steering Committee Member and the Director of South Asia at the World Association of Investment Promotion Agencies (WAIPA) - a prestigious world association of organizations similar to PBIT created by UNCTAD. TRANSACTIONS Department Punjab Board of Investment and Trade targets a socio-economic growth through its Transactions Department. The department plans to fortify its deep roots, both locally and internationally, by reaching out to leading businesses for discussing the panoramic commercial opportunities. As per the initiative of inventiveness, the department plans to provide a transaction advisory as defined in its role to bring-in the investments and establish new businesses. For this purpose, Pitch books of different identified sectors are a new resourcefulness of this department which would target to develop the in-house capacity of production by connecting the local and international market players. This would not only ensure the technology transfer but also create several jobs in the province. The department plans to connect through the regional IPAs, financial institutions, the embassies in different countries and local chambers as well so as to fast-track the process of economic growth and industrialization in Punjab in regard to its recognition as The Land of Opportunities Contact: Rana Waqas Additional Director Head of Transactions PBIT Rana.Waqas@pbit.gop.pk Bilal Ansir Investment Associate Transactions, PBIT Bilal.Ansir@pbit.gop.pk Punjab Board of Investment & Trade 23 Aikman Road, GOR 1, Lahore. Pakistan PABX: +92 (042) Fax: +92 (0) Web:

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