Due to the significant drop in sales of motorbikes caused by excessive inflation, dealers called out to bike manufacturers and auto parts vendors to lower their prices while taking into account the diminishing purchasing power of their customers.
Karachi Motorcycle Dealers Association Chairman Mohammad Ahsan Gujjar said while talking to The Express Tribune said:
“We are looking for motorcycle buyers as sales of all bikes have slid. Recently, the US Dollar has fallen significantly against the Pakistani Rupee and petrol prices have also been reduced, but customers have not yet received any relief.”
Ahsan revealed that around 30,000 motorbikes on average were being sold in a month in Karachi, but now they are able to sell just around 6,000 motorcycles. He urged Japanese and Chinese motorcycle manufacturers to reduce the cost of their 70cc bikes by Rs. 40,000 and Rs. 20,000, respectively.
Japanese companies have jacked up the prices of motorbikes with engine capacities of 100cc, 125cc, and 150cc in the range of Rs125,000 to Rs175,000 in the last year and a half, according to Ashsan, and these prices must be withdrawn immediately he stressed. Not only that the Rupee has recovered its value but with that, the raw material has also become cheaper.
It is pertinent to mention that assemblers of passenger cars, which have achieved 20% to up to 65% localization, have slashed the prices of their models during the last month amid strengthening currency value against the US Dollar. However, bike makers, who boast to have achieved up to 90% localization are yet to transfer the benefit to the consumers.
With this much localization, bike makers were increasing prices in tandem with passenger car assemblers even during the slightest of forex fluctuations. But now they are taking longer to reduce prices than they did to increase them.
In the current terrible economic conditions, the chairman of the association warned that dealers were finding it increasingly difficult to sustain the operational costs of business, including employee wages, electricity bills, and other expenses. “If the market position remains static and prices are not slashed, they would have no option but to close shops,” he said.
On the other hand, the former chairman of the Association of Pakistan Motorcycle Assemblers, Muhammad Sabir Shaikh revealed that motorbike assemblers had imported auto parts when the US dollar was trading at Rs 290 and they stopped all imports when the dollar shot up, and crossed Rs 300. He said that the dollar was gaining value for around 1.5 months and then falling in another 1.5 months, pointing out that market uncertainty persisted over the currency’s appreciation and depreciation. Sabir said:
“It is quite difficult for the assemblers to take a decision about reducing prices before January 2024 as they are not in a position to announce any price cut because of continuous volatility of the currency. When the US Dollar rises, bike prices go up, this is right. But there are also a host of other reasons that drive up prices which include high electricity and gas tariffs, and increasing rates of raw material, etc.”
According to auto analyst Zain Shariq, comprehending the market phenomenon involves two key aspects. Firstly, auto parts are imported, thus there is a three- to four-month cycle before any changes in the value of the US dollar have an effect on the market. Second, businesses are forced to raise prices due to elevated labor costs, inflated utility bills, and rising rates of inflation.
Interestingly such theories [of a three- to four-month cycle for any changes to have an effect on the market] are only presented to the consumers when prices are supposed to go down. But when the Dollar goes up, all assemblers whether of 2-wheelers or 4-wheelers spare no time in announcing the price hikes. Still, as revealed by Asim Gujjar, with nearly an 80% decline in bike sales, how long will the companies be able to hold up the prices will be an interesting thing to observe.
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