Are We Heading Towards Another Car Price Increase

US Dollar continued its momentum against the Pak Rupee as the local currency further weakened reaching 167.30 against the Dollar. Traders cited year end payments by corporates as the main driving force behind the increasing demand for dollars. PKR’s all time low against the dollar was 167.8975 recorded on the 7th of April 2020.

Car prices in Pakistan are always vulnerable to exchange rates. Even slightest of variation in Rupee-Dollar parity results in the increase in prices of local assembled vehicles. Despite claiming to have achieved up to 70% localization, the impact of Rupee depreciation has always been fully transferred to the consumers. And even in cases such as when Rupee recovered by up to 6% against the Dollar late last year and in fact stayed stable for nearly 4 months, the prices of local assembled cars instead of being reduced were pushed further up.

Related:  Have Local Automakers Artificially Raised the Price Bar?

Recently during the days of COVID-19 lock downs with plant operations at a halt and zero sales, Indus Motor Company and Honda Atlas revised the prices of their products substantially citing Rupee depreciation as the reason. Prices of Corolla variants were increased by up to Rs 200,000 while that of newly launched Yaris were revised by Rs 150,000 even before the first unit hit the roads. Prices of Hilux Revo and Fortuner were increased by Rs 300,000 and Rs 500,000 respectively. Honda Atlas revised the prices of City by up to Rs 70,000, BR-V by up to Rs 100,000 whereas the Civic witnessed an increase of up to Rs 120,000.

The local industry had demanded the government for a stimulus package to cope up with the deploring situation however the Pakistan Automobile Manufacturers Association (PAMA) has shown displeasure over the absence of supportive measures in the recently announced Financial Budget 2020-21 where the government has literally shown a cold shoulder to the auto industry. The sector has demanded the government to immediately reduce the taxes in order to help revive the ailing auto industry which was already battling with nose-diving sales & is now hit hard by the COVID-19 pandemic.

Related: Future of Auto Industry with No Government Support

The local auto industry is currently going through the worst period ever with sales reduced by 50% to up to 80% in various segments during the 11 months of the current fiscal year and with no supportive measures offered by the government, the situation doesn’t seem to be improving anytime soon. Now with Rupee slipping to 167 against the Dollar, are we heading towards another price increase? And if car prices are further pushed up, the negative impact on car sales as well as the local auto industry will perhaps be irreparable.

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