PAMA Says Government Cannot Fix Car Prices

Pakistan Automotive Manufacturers Association (PAMA) has called out the government for demanding to rationalize car prices and said the country had a free market, and it was the market that decided prices, not the state. This comes on the back of government’s instructions to initiate a forensic audit of new car prices in Pakistan.

The Ministry of Industries and Production took notice of the recent round of car price hike, after the Public Accounts Committee (PAC) directed to check the reasons. In a meeting of the auto industry monitoring committee last week, the government officials once again asked auto assemblers to rationalize the significantly high car prices despite tax incentives given to them.

Related: Government to Conduct Forensic Audit of Car Prices

However according to Director General of PAMA, Abdul Waheed Khan:

“The auto industry is linked to the international market. The raw material and parts’ cost are very different and the government cannot fix car prices.”

Abdul Waheed Khan added that Pakistan has a free market and there was a market mechanism. Pakistan does not have a centrally planned economy like a communist state and therefore the government could not fix car prices. According to PAMA, 70% to up to 80% of an average passenger car was made up of some grade of imported steel. Therefore, car prices were directly linked to steel prices as well. Waheed Khan mentioned that freight charges have increased by 300%, exchange rates have gone up and raw material prices have also increased. “And when these costs go up, duties on these also go up similarly, which forces car assemblers to jack up car prices,” he said.

Related: Buying a New Car isn’t Anyone’s Piece of Cake

On the other hand, Chairman of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Abdur Razzaq Gauhar said that they were now forming TORs of car pricing. Data would be checked and it would be made known how much impact exchange rates have on cars. “Cars are assembled locally, therefore they shouldn’t be completely pegged to dollar rates,” Gauhar said. Global data and multiple value-addition details would be examined to determine if there was actually a problem or it was just a perception that car assemblers increased prices without reason. “I am hopeful that we would identify if there’s a problem,” Gauhar said “But I cannot assure a solution” he concluded.

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According to Engineering Development (EDB), the regulator of the auto industry, the government has given many incentives in different policies for the auto industry therefore it has the right to question and check intermittent price hikes. However, a source in the auto industry said that the government takes notice only when there’s hue and cry from the public, and later completely forgets about it.

Related: Car Financing Costs will Haunt You

The Ministry of Industries and Production also took notice last year asking car companies to provide justification for raising car prices. The letter instructed automobile manufacturers to provide their costing structures failing which, price fixation proceedings would need to be carried out unilaterally. The letter added that it was unacceptable and the government might have no recourse but to initiate regulatory measures, which include fixation of prices under the Price Control and Prevention of Profiteering and Hoarding Act, 1977. However, auto companies maintained the opinion that international commodity prices, freight costs and rupee devaluation have forced them to jack up car prices.

Source: The News

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