Can Increase in Car Prices Bring Desired Results?

Automobile market in Pakistan acts quite weirdly when compared to other markets. When carmakers in regional countries are giving heavy discounts and benefits due to slowdown in sales, auto assemblers in Pakistan are increasing prices even when the sales are nose-diving.

Related: Suzuki’s Troubling Sales on Both Sides of the Border and the Way it Responds

In the last 2 years, prices of cars kept on increasing primarily due to fluctuating Rupee value against the US Dollar & added duties and taxes by the government. Since December 2017, car prices were revised for nearly 17 times with an increase of up to 56% in vehicle prices. Auto assemblers never missed a chance of revising the prices even in the slightest of variation in Rupee-Dollar parity.

However since August 2019, Rupee has regained some strength having recovered back from Rs 160 it now stands at Rs 154 against the Dollar. Now instead of reducing prices, the assemblers here are busy giving yet another push to car prices even when the industry is suffering from a 45% decline in sales.

Related: Pak Suzuki WagonR AGS Launched at PKR 18.9 Lac

It is quite astonishing that there has been no additional duty or tax implemented by the government, but the automakers are constantly giving substantial push in prices. On the eve of New Year, anticipating that sales might pick up, Suzuki and Toyota announced price revisions while Honda only recently has also given a major price push which will officially take effect from the 16th of January 2020.

Honda and Toyota are already observing non-production days since the beginning of this fiscal year whereas now Pak Suzuki has also announced to keep its plant shut for 4 days in January. Reportedly the assemblers still have thousands of unsold inventory at their disposal, still instead of giving discounts and reducing their profit margins, the assemblers are pushing the prices higher and higher while not introducing any significant improvements to their products whatsoever that can justify the price increase.

Related: Maruti Wins Big with Discounts, Pak Suzuki Can’t

To think that increasing prices beyond limits will help recover the dwindling sales looks like a sheer fantasy, but only time will tell whether this move is going to help these companies patch up their declining profits. We will have to wait for January 2020 sales figures to find out the impact of this latest increase in prices.

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