Hefty Premium Despite Cars Sales Down by 53%

Cars sales in Pakistan are witnessing a deplorable decline ever since the beginning of fiscal year 2019-20 due to added duties & taxes, high interest rates, depreciating currency value and constantly rising prices.

Related: Car Sales Declined 53% in FY2019-20

Towards the end of FY2019-20 sales came to a complete halt further denting the deteriorating sales. The fiscal year ended with sales plunged by 53% to 110,583 units as compared to 235,229 units sold in the previous fiscal year. However even during the lockdowns when economic activities including car sales & production were completely stopped; prices of cars in Pakistan were constantly climbing up with substantial margins.

Things have changed a lot during last couple of years, such as prices of cars almost got doubled, car sales were cut into half but one thing that hasn’t changed is the premium– the extra amount also commonly called as on/ own money that one needs to pay if he intends to get a quick delivery of the vehicle. This menace has long existed in our market and in past government has taken certain measures to curb this practice but none of the efforts ever proved to be fruitful in favor of consumers.

Related: FY2019-20: A Nightmare for Car Sales

With car sales reduced by half, one would expect to get quicker deliveries since obviously the overall demand in the market has been low for quite some time now. However astonishingly, cars are still not available for quicker deliveries and the delivery time for most models still falls between 3 weeks to up to even 4 months. While in case of Toyota Yaris the delays in deliveries can be justified since being a newly launched car it grabs customer attention and ever since it made its debut in March, the COVID-19 pandemic came to spoil the launch and with lockdowns enforced, the production & sales were affected hence delays in deliveries are understandable.

However for cars those are in production for years, the prolonged delays in deliveries can never be justified. Particularly when you consider that assemblers were observing plant shutdowns during the last 6 months of previous year citing slowdown in sales. Honda Atlas alone observed 108 non production days (NPDs) whereas Indus Motor Company observed 55 NPDs while operated its plant on single shift basis instead of multiple shifts till the end of December 2019. Pak Suzuki was least affected with the situation and observed only 7 NPDs that too in the first two months of this calendar year. So perhaps it was the best possible chance to reduce the demand-supply gap but unfortunately it looks as if the menace of premium/on/own is there to exist.

Today none of the cars are available for instant delivery as dealerships of all carmakers are charging premiums as communicated to us by various potential buyers. In the absence of used imported cars, people have no choice but to pay own/ premium, or to wait for months even after making payment of their vehicles.

Related: Dealers Involved in Charging Premium will be Blacklisted

Earlier this year Prime Minister Imran Khan constituted a committee consisting of the law minister, finance minister and an adviser to develop a regulatory framework including penal provisions, if required, to tackle the illegal demand for premium by car dealers over and above the invoice price. The committee while establishing the framework was supposed to focus on the capacity and production standards of vehicle manufacturers as well as the mandatory vehicle safety standards.

A high-level meeting was also held which was chaired by the Adviser to Prime Minister on Commerce,  Abdul Razak Dawood, in which automakers and officials of the Engineering Development Board (EDB) were present. Automakers reached an agreement on discouraging the practice of demanding premium while ruled out their involvement in charging premium amount on the delivery of cars.

Related: Sales Tax Holidays in Malaysia- Can Pakistan Follow Footsteps?

The meeting came in the wake of directives by the cabinet to initiate a crackdown on the carmakers charging premium in collusion with the dealers. As a result, both the car industry and government officials agreed to launch a crackdown on the dealers. However considering the current situation, the steps that were meant to be taken somehow got lost in the middle.

According to the Auto Policy 2016-21 which was introduced by the previous government, payment at the time of booking a vehicle should not be more than 50% of its total cost and the delivery of vehicles should be within two months. Also, the car assemblers will be bound to pay a price at Kibor plus 2% prevailing at the date of final delivery in case the delivery of cars to the consumers is delayed.

Related: End of Suzuki Jimny in Europe- A Lesson to be Learned?

Interestingly however, IMC initiated the bookings of Toyota Yaris requiring 100% advanced payment. Perhaps the regulations exist to grace the papers only, while the auto consumers of Pakistan continue to suffer at large. If you have an experience of getting a vehicle booked recently, do let us know in the comment section below regarding how much own/ premium was being charged.

Notify of
Inline Feedbacks
View all comments