Pak Suzuki Rating Upgraded with Stable Outlook

The Pakistan Credit Rating Agency (PACRA) has upgraded the Pak Suzuki rating, elevating its long-term rating from AA- to AA and its short-term rating from A1 to A1+, maintaining a stable outlook. This upgrade highlights Pak Suzuki Motor Company Limited’s (PSX: PSMC) robust business fundamentals and its leading position among automotive original equipment manufacturers (OEMs) in Pakistan.

PSMC assembles and manufactures a wide range of vehicles locally, maintaining a dominant presence in Pakistan’s small and mid-sized car segments. The company boasts the largest dealership network across the country, playing a significant role in the domestic automotive industry’s development. As a fully-owned subsidiary of Suzuki Motor Corporation, Japan, Pak Suzuki benefits from both operational and strategic support.

Pakistan’s automotive sector is transitioning into a more diversified and competitive landscape. New entrants such as Kia, Hyundai, Haval, MG, and Changan have introduced innovations in SUVs, hybrids, and electric vehicles, expanding consumer choices. Despite this, Pak Suzuki rating reflects the company’s strong market share and its ability to maintain leadership in core segments.

Passenger car sales in FY25 surged by approximately 38% to 112,203 units from 81,579 units in FY24, as per Pakistan Automotive Manufacturers Association (PAMA) data. Similarly, sales in the light commercial vehicle (LCV) and jeep segment jumped 61% to 35,820 units, up from 22,250 units the previous year. In line with these trends, PSMC recorded significant growth in CY24 and the first quarter of CY25.

Financial Performance and Capacity Utilization

PACRA’s upgrade of Pak Suzuki rating also considers the company’s improved financial indicators and profitability. The Suzuki Alto remains the company’s best-selling model, followed by Swift, Cultus, and Wagon R, which continue to attract consumers due to their reliability and affordability.

PSMC holds an estimated 60% market share among PAMA-member companies in the passenger car segment. The company’s capacity utilization rose to 43% in CY24, compared to 27% in CY23. Its motorcycle segment also improved, reaching 45% capacity utilization, up from 36% in the previous year.

Despite its strong performance, PSMC faces increasing competition from new players, especially Chinese brands offering aggressive pricing strategies. Additionally, the rise in used vehicle imports could impact local sales. Regulatory challenges also persist, particularly in meeting targets set by the Auto Industry Development and Export Policy, as the sector heavily relies on imported completely knocked-down (CKD) kits.

PSMC maintains a strong financial risk profile with robust cash flows and efficient working capital management. The company’s capital structure remains low-leverage, with minimal long-term borrowing through the TERF facility and unused short-term credit lines. Capital expenditures are primarily funded internally, and PSMC recently reported a foreign exchange gain after settling all foreign liabilities during CY24.

PACRA’s upgraded Pak Suzuki rating depends on the company’s ability to sustain its market dominance, profitability, and compliance with regulatory frameworks in a rapidly evolving automotive market.