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On-Money & Delivery Time Coming Down as Auto Market Crashes

Rising car prices, increase in interest rates, curbs on auto financing, restrictions on the import of CKD parts and the prevailing political and economic uncertainty have proven to be turbulent for local auto assemblers, majority of which are now offering quicker deliveries, price cuts, and various packages to attract customers.

One may wonder how assemblers are able to make relatively quicker deliveries in these tougher operating conditions, while they continued to struggle to timely deliver the vehicles in their glory days. Well the answer is simple, the demand has crashed down primarily due to shrinking purchasing power of the masses and in the current economic situation, they don’t feel like spending a hefty amount on purchase of new automobiles.

Related: Policymakers’ Love With the On-Money Devil

Secondly, the investors (hoarders) who have foreseen the turbulent situation are now hastily disposing off their stocks. Mashood Ali Khan, a former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) had said earlier this year that investors were highly active due to the high demand for vehicles and “own money” was thriving. Now however, the situation has changed and investors are selling vehicles below their invoice price by offering discounts due to the subdued demand.

Along with quicker deliveries, most assemblers are now offering various incentives & price cuts to clear out their stocks. According to Prince DFSK CEO Sohail Usman, his company had cut the price of the 800cc Prince Pearl hatchback by Rs200,000, followed by a Rs300,000 drop on Glory 580 Pro crossover SUV. The new prices are effective until December 31 and these vehicles are supposed to be delivered within 30 days. Sohail said:

“We are attracting cash buyers; the auto market has more of them than those who opt for auto financing through banks.”

He added that bookings were on the decline in the wake of the State Bank’s decisions to rein in auto financing, increase interest rates and protect the vulnerable exchange rate. Sohail said the share of bank leased vehicles in their total sales figures has plunged from 30-40% to just around 5 to 10%.

Related: Car Sales Going Down, Where is Plan B?

On the quota imposed by the State Bank of Pakistan in opening letters of credit for imported parts, Sohail Usman claimed the central bank was favoring big Japanese assemblers instead of other players. He was also apprehensive of the hike in interest rates, fearing that this could lead to a rise in customers who default on their installments.

Lucky Motor Company (LMC) has slashed the price of different models of Kia Sportage by up to Rs 251,000 during October, while the company is now offering a 40% discount on after-sales services, with a free pick-and-drop service available to those who want to take their vehicles for maintenance between Nov 20th and 30th. The Kia Picanto automatic is currently being delivered within a month on full payment, while the manual model is ready for immediate delivery upon complete payment. Meanwhile, the Stonic and Sportage models are ready for delivery on full payment, while bookings of the Sorento 2.4FWD model are temporarily suspended but the 2.4 AWD and 3.5FWD models are readily available.

Related: Used Cars Never Depreciate in Pakistan

A dealer from Hyundai Nishat said that free registration is being offered on the Hyundai Tucson AWD until December 31, which translates to a benefit of up to Rs200,000. “This benefit can be called a package or price discount for buyers, given the current lull prevailing in the auto market,” he added.

According to Shafiq Ahmed Shaikh, Pak Suzuki’s head of public relations, all Suzuki models would be delivered within 2 to 3 weeks if bookings are made until December 31, while some models would take 4 to 5 weeks to arrive. Next year, however, the delivery time would depend on the availability of funds for imports, he added. In the current scenario, Shafiq said Pak Suzuki is already offering different incentive schemes to boost its sales. Other assemblers including Honda, Toyota, Proton and Changan are also committing early deliveries with certain incentives offered to their customers.

Related: Car Sales Reduced by 36% YoY in October- Cut to Half in 4M-FY23

Car sales in Pakistan have already suffered from a deplorable 47% decline during the first 4 months of this fiscal year, as only 39,700 units were sold in 4M-FY23 compared to 74,952 units sold during the corresponding period of previous fiscal year. Looking at the current situation, the sales figures of new cars are likely to remain unobtrusive in coming months.

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