Car Prices in Pakistan Will Rise Again Very Soon
The local auto industry is buzzing with rumors of another wave of price hikes. The latest price-killing saga took place in July this year after the US dollar (USD) exchange rate surged to Rs 240 per USD.
With another recent depreciation of the PKR against the USD, history is likely to repeat itself soon.
So far, Hyundai and Chery have increased the prices of their vehicles, others will follow suit. But will these price increases be larger than before? Let’s dive into the details and find out.
Why Will Car Prices Go Up?
On 2nd September the US dollar began gradually appreciating following the reinstatement of the agreement with the International Monetary Fund (IMF). In the past 18 days, the increase has been continuous, reaching almost 240 rupees.
The last time the USD exchange rate hit this high was on July 28th, the same day most automakers hiked the prices of their vehicles. In his recent discussion with ProPakistani, a renowned business analyst, Arslaan Asif Soomro said:
If the dollar breaks above Rs 240, car prices are likely to soar again. However, global commodity prices could fall further, giving automakers enough protection to maintain their margins.
Given the similarity of the two calendars, alarm bells are ringing for impending price increases in the auto industry.
How Much Weight Are They Gaining?
From late July to early August, automakers increase their prices by 15-20%.
Shortly thereafter, after the USD fell against the PKR, companies cut prices by 50% from the previous rise. Simply put, if the price of a car originally went up by Rs.500,000, companies would drop it by Rs.250,000 as soon as the exchange rate improved.
Earlier market reports suggested that the automakers have hiked prices on the basis of predictions that the USD exchange rate could rise to 250 rupees.
The Auto Industry in Chaos
PKR’s demise coincided with regime change in Pakistan, which sent the state’s economy into a tailspin. After that, the prices of all basic products, including cars, began to rise, and inflation broke all records.
To add to these problems, the government has announced a total import ban for the automotive sector, including Completely Knocked Down Kits (CKDs) and Completely Built Units (CBUs).
Although the government has since resumed imports from the auto sector, it has also increased taxes to curb sales of premium sedans and SUVs. Also, the State Bank of Pakistan (SBP) has restricted auto financing, which has severely impacted auto sales.
In addition, automakers face massive production cuts as letters of credit for CKD import clearance are not approved. Limited production caused long delays in deliveries and reduced demand for cars.
Sales have been on a downtrend for several months due to increased spending and falling demand. Import restrictions, delivery delays, price increases, and production cuts can further exacerbate the problem.
Are you thinking about buying a car or do you prefer a bike? Turn off the sound below in the comments.
Also Read: Honda Increases the Price for City and Civic