
12 minute read
Is this economic crunch ready-made for the to flex on the competition? Sportage
By: Daniyal Ahmad
Picture this, dear reader: a company bursts onto the scene with a novel product or service, captivating consumers and cementing their offering as the industry benchmark. This phenomenon is known as a first-mover advantage. The potential rewards are colossal, yet the stakes are equally high. Companies must execute flawlessly from the outset, with little margin for error. The nexus between first impressions and first-mover advantage is paramount.
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Take the KIA Sportage, for instance. It was love at first sight. Few vehicles have forged their own automotive niche and upended established players quite like the Sportage. Were Pakistan to document its iconic vehicles, the Sportage would rank alongside the Mehran and Corolla in terms of cultural significance.
But with first-mover advantage comes the peril of second-mover advantage. One might assume that the Sportage was merely the hors d’oeuvres in terms of all that came after it, because so many did come. It was taken for granted in that regard, which is why the question was raised if its crown was up for grabs. And, Profit did pose the question last year: was its crown in jeopardy? While we remain no closer to resolving that conundrum, we do have an inkling of how the Sportage might counter those vying to usurp it.
By the time this article goes to press, the Sportage Black will have been unveiled. It may not be the latest global edition of the Sportage, but that is of little consequence. The Sportage is poised to accomplish something far grander - it is about to demonstrate to the crossover market why taking initial risks can pay dividends. And it comes armed with the battering ram of Pakistan’s most severe economic and supply chain crisis in recent memory.
What are we on about?
In June 2022, Muhammad Faisal, President of the Automotive Division at Lucky Motors, spoke to Profit about the success of the Sportage. “Launched in July 2019, the Sportage will soon celebrate its third anniversary in the market. Yet, it has not reached its zenith; it remains in its nascent stage,” he elucidated.

“The Sportage not only established a foothold in the market but also blazed a trail for subsequent entrants. We comprehend the significance of timely innovation; procrastination can result in competitors capitalising on opportunities,” Faisal expounded.”Nonetheless, we also acknowledge that launching a product at a palatable price point is paramount to its triumph. The Sportage is still relatively new to the market; we have made substantial investments in localising it,” he continued.
Faisal concluded by discussing the potential of the Sportage. “It possesses untapped potential and delivers value for money at its current price point. It can continue to flourish in the market for the foreseeable future,”.
At the time, these statements were perplexing because the market was in a much better condition. Yes, the economic deterioration was evident as the State Bank of Pakistan (SBP) had abandoned a myriad of sectors, including the automotive sector. Automotive sales ended with an all-time high to see out FY 2022-23 in June. However, the gravity of the situation had yet to set in. It was then that Profit asked how the KIA Sportage would retain its crown in the segment that it had not only created but had also become perhaps the most dynamic in the automotive industry as a whole.
Read more: The attack of the SUVs Now, Profit has documented why we chose the Sportage of all cars, why the segment had become so competitive, the dynamics underpinning it, and so forth. What’s relevant to us is that it looked like an uphill battle for the Sportage. Fast forward almost a year later, Pakistan is still in the midst of the very same crisis that began last summer. If anything, it has only worsened with respite still a bit further away. Automotive supply chains are strained, forcing manufacturers to raise prices to levels unfathomable last year. This is where this current story diverges from the previous one.
“The latest generation of the Sportage represents a leap for the vehicle,” mused Muhammad Faisal, President of the Automotive Division at Lucky Motors. “It commands a premium price in every market in which it has been launched. From Pakistan’s perspective, volumes must be justified to ensure viability. Without sufficient volume, no automotive company can sustain itself,” Faisal added.
If the new Sportage wasn’t viable in June of 2022, then it is even less so now amidst the teetering economy. The thing is, this was KIA saying this after having achieved its success for the past three years. If it’s this bad for them, what about all the shiny new competitors that came in 2022 alone to dethrone it? Let’s just say things are not going to plan.
Localisation, and a ticking clock
Localisation denotes the utilisation of indigenous components in manufacturing. In the automotive industry, it entails producing vehicles with a preponderance of local parts. However, not everything can be produced domestically.
The Automotive Development Policy (ADP) 2016-2021 sought to fix this by providing duty waivers on imported components to local groups collaborating with foreign brands. The objective was to enable these groups to assemble their cars, cultivate their supplier networks, and ultimately produce everything locally. The duty waivers furnished a competitive advantage against established companies such as Toyota, Honda, and Suzuki.
Section 4.2.1-C of the ADP stipulated a concessional rate of customs duty at 10% on non-localised components and at 25% on localised components for a duration of five years for car and LCV manufacturing. Recall that first-mover advantage? In the competition against the five-year deadline, KIA may have had an earlier cut-off date, but it has succeeded in seizing a larger share of the market to bolster localisation while it could. The remainder may have later cut-off dates but will have expended a significant portion of that time battling this crisis, and localisation is not an instantaneous process.
“Localising any component necessitates a minimum of one year, while on average components can take up to two and a half years to be fully localised. The rate of localisation varies depending on the intricacy of the component,” elucidated Syed Shabbiruddin, Director of Sales & Marketing at Master Changan Motors. “The localisation duration for a metal brake will be comparatively brief, while it will be considerably protracted for a fuel tank due to the disparity in their intricacy,” added Shabbiruddin.
Solely based on the duration of time, KIA is likely to have localised a larger portion of their supply chain compared to their competitors. The fact that the current Sportage model is not the most recent generation and, as a result, not as technologically advanced as other options available in the market, means it is also relatively less intricate. This only expedites the rate of localisation.
Then there’s the volumes.
Volume glut vs scraping the barrel

“When manufacturers want their vendors to make new parts for them, they have two options,” explains Ammar Hameed, Director at Sazgar. “They can either bear the tooling cost themselves and upgrade the vendor, or they can amortise the vendor’s cost by allowing them to charge a higher price for a certain number of units to recoup their expenses,” Hameed adds.

In either of the two scenarios, volume is paramount. The greater the number of units, automobiles in our case, the lower the per-unit cost of production will be. How crucial is volume? “Our localisation plans are formulated in conjunction with our volume forecasts. The feasibility for everything hinges on whether the volumes exist or not,” adds Shabbiruddin. Again, recall the first-mover advantage? Not only did KIA absorb the initial dose of volume, but it managed to reap perhaps the most from the glut of volume that existed in FY 2022-23 simply due to its prior presence in the market for a few years.
Similarly, it’s not the fault of any new competitors that they didn’t anticipate the economy going South in such spectacular fashion. None of us did, really. However, again, everyone else’s CUV offerings have endured more time in this crisis since their launch as a percentage of their total time relative to the Sportage simply because the Sportage was launched when it was.
The potential localisation advantage is merely the dividend KIA has earned for taking the risk with the Sportage. It is the dividend on their decision to release the Sportage when they did, and to beat out to their initial competition.
The Sportage’s cudgel to weather the storm
Let’s recap. KIA opted not to launch the new Sportage when their success seemed vulnerable. They had introduced CUVs to the Pakistani market, resulting in a surge of competitors. However, the economy took a downturn, leaving less volume for everyone to distribute their localisation costs over. Additionally, time is of the essence. The Sportage retains its previous volume and has the potential to capture new volume with its less intricate technology, resulting in enhanced control over their supply chain.
What does this mean? Why haven’t we discussed the black edition of the Sportage mentioned earlier? And what about rumours of imminent improvements to the Sportage? It’s time to make sense of everything and wrap up.
The black edition of the Sportage is just as its name suggests. Will it have improvements? This piece was written before its launch, so it’s possible. This ties into the next part: rumours about future upgrades.
Will they happen? Upgrades are common in the industry. Localising and further developing the Sportage necessitates upgrades. When will they happen? It’s hard to say. Doesn’t this mean the Sportage’s price should drop? Theoretically, and it has over the past year. KIA’s marketing strategy includes occasional limited-time price drops, but they’re unpredictable.
The reworked Sportage is basically a ‘facelift’ of sorts, the kind that is most common with Indus Motors Toyota with Honda also going for cosmetic updates for launched models, from time to time. While the attempt to pass these changes off as ‘new’ or ‘updates’ can be appreciated, it is often comical. Corolla’s typical upgrades to the headlights and grill that comes with a price hike are laughable.
Muhammad Faisal, President Automotive Division at Lucky Motors

Honda, with its famous ‘shark fin antenna’ inclusion as a feature to the previous generation Civic was equally hilarious.
These are big companies with massive customer bases. They have to do better and have time and again failed to justify and qualify some of their production decisions and quality promises, respectively.
Will the ‘black edition Sportage’ be more of the same? It might just be the case. But KIA is at an advantage; it does not yet have the reputation that Indus Motors and Honda have with regards to making over-marketed mid-life upgrades to elongate the life of a particular model of car to keep sales up. It really depends on how significant and appealing the changes are to come to a conclusion. A simple grill and headlights upgrade will not do the job, but in the current circumstances this might just be the right amount of satisficing.
What does a company do when it has additional proceeds on its hands? All sorts of things: they could advertise more, add features, reduce their prices, provide promotions, increase salaries or save for a rainy day fund. The fact of the matter is that at a per unit of profitability, the Sportage likely trumps its competitors now.
What Lucky Motors does with that is their business. At worst, their iterative updates will not work, and they’ll just weather the current economic storm until they can release the new Sportage once the dust settles. At best, they can now toy with the competition in ways they really couldn’t before and maybe even release a lot more cars than just the new Sportage by allocating their additional proceeds to those developments or even introduce a fully loaded new Sportage at a reasonable price.
Will the rest of the industry take it lying down?
“Our research unveils a universal truth: price sensitivity permeates every segment of the world. Sensitivity to price fluctuates with the product at hand, varying in degree from individual to individual. With car prices soaring beyond income growth, customers are compelled to rationalise the prices of their coveted cars based on the features they offer. However, CUV buyers remain rela- tively impervious to price sensitivity, their sights set firmly on acquiring the latest and greatest,” elucidates Shabbiruddin.
Past triumphs offer no guarantee of future victories. New entrants are hot on their heels, making strides of their own. However, what appeared to be a decisive victory has reverted to a contentious match. Was this a fortuitous turn of events or did KIA anticipate the crisis? The jury is still out. What is indisputable is that KIA’s decision to retain the old model appears to have been a judicious one. The new Sportage will make its debut at Lucky Motors’ discretion, rather than bowing to market forces as previously anticipated.
On the other hand, CUVs from China, Korea, Malaysia and Japan may very well dominate the market and dethrone the Sportage. Even such a scenario may not be perceived as entirely unfavourable at KIA’s headquarters. Should their competitors flourish, KIA could subsidise the costs of cutting-edge hybrid engines that seem poised to be the must-have feature going forward and other components that would otherwise need to be localised independently for the new Sportage. n

Ahmad
Iqbal OPINION
Changing how Pakistanis commute and think about commuting
This February marked a decade of Lahore’s BRT service. But what can we learn from the past to better our mass transit future?
Cities are profoundly influenced by how people move around to go about their daily lives. Yet for all the discussion of the need for public transport and walkable cities, there is a profound and historic relationship between innovation in modes of transportation and urban development.
In many ways, a city is a living, breathing, body with a vast number of moving parts. Often information about these spaces is processed and decisions made based on two-dimensional maps drawn on paper. This does away with the pulse of the street. Space and cities are not simply a fact of landscape or a count of roads and buildings. It might in fact be more helpful to conceptualise a city as an area where the past leaps on the present, even as the present attempts to raze the past to the dust.
In very simple terms, it means that an area’s past is constantly in battle with its present realities and challenges. And historically, one of the major contributors in this struggle are modes of travel. This impact of transportation on cities and the way we live can be best understood by looking back at how innovation in transportation influenced urban development.
The writer is the former mayor of District Narowal. He has worked extensively on local government.
Cities were densely populated before motorised transportation took over in the twentieth century, and the form of that era can be seen in the walled city of Lahore or the Purana muhallas (old city neighbourhoods) of most of our cities in Pakistan, which were built as walkable cities, catering to the residential, economic, and recreational needs of a relatively large number of people.
If one takes Lahore as a case study, then the advent of the motorcar and its increasing dependence over the decades has given birth to low-density car-based neighbourhoods such as Gulberg, Model Town, DHA, Bahria Town, and now almost all the farmland between Kasur and Gujranwala is being converted on the same model. The breakneck speed at which Pakistani cities are sprawling is also compounded by the public sector investment in urban infrastructure that caters to the motorcar in the shape of underpasses, signal-free corridors (urban highways), overhead bridges, etc.
This car-based development mindset has resulted in the phenomenal expansion of our cities and increasing congestion and inequality of access in the absence of well-functioning public transport systems in the country. The world is now reverting to the idea of dense people-friendly cities, and the idea of a 15-minute city.
This February marked the end of the first decade of mass transit investment in the modern history of Pakistan. Lahore’s metro bus (BRT) was inaugurated ten years ago in February 2013. We look at the history and the recent journey of our cities and mass transit.
Pakistan’s journey towards a modern and efficient public transportation system has been a rich tapestry woven with two distinct threads: the Lahore Tramway network and the Karachi Circular Railway (KCR). Let’s take a closer look at these two iconic transportation systems and how they have influenced the development of mass transit in Pakistan.
Lahore’s pioneering tramway network
In the late 19th century, the Lahore Tramway network made its debut, ushering in a new era of mobility for the citizens of Lahore. With its tracks winding through the city, connecting the central business district with various neighbourhoods and suburbs, the tramway provided a convenient and reliable mode of transportation for the people of Lahore. However, the golden age of the Lahore Tramway network was short-lived as the system struggled to compete with other modes of transportation, suffered from a lack of investment and maintenance, and was ultimately brought down by political instability and rapid urbanisation. Despite its decline, the Lahore Tramway network remains an important chapter in the history of mass transit in Pakistan and continues to inspire new initiatives and developments in the field.