PKR Recovers Against US Dollar- Will Car Prices Come Down?

Since  September 4, the Pak Rupee (PKR) has regained its lost value against the US Dollar, recovering 9.9% from an all-time low of Rs 333.5 to reaching Rs 299.8 against $1 as of putting down this article.

The Rupee is expected to strengthen further and according to analysts might be there around Rs 290 by the end of this month. When looking at such a situation, the first thing auto consumers naturally wonder is if the prices of new cars in Pakistan will decrease. In retrospect, however, each and every one of us is likely aware that our answer will be a simple “no.”

Screenshot 2023 09 16 at 08 51 56 USD to PKR Rate 1 US Dollar to PKR Rates

Historically, local assemblers have rarely provided any relief to the public when the rupee strengthens against the US dollar. In contrast, price increases occur almost immediately whenever the value of the rupee declines.

Related: Not the Ideal Start to New Fiscal Year for Local Assemblers

Assemblers announced nearly 7 price revisions in the first 5 months of this year, sometimes even two revisions in a single month. Additionally, since 2018, there have been more than a dozen price revisions per year, rendering a price increase almost every month. This also invalidates assemblers’ claims of high localization because the impact of currency depreciation is often 100% passed on to customers, sometimes even more.

Lucky Motors recently announced a price increase of up to Rs 350,000 on various Kia models, alongside several 2-wheel manufacturers who have jacked up the prices within the last week, other assemblers were likely to follow suit, but then Rupee started to strengthen. The question is, will the company alongside bike manufacturers roll back the latest price increase in Pakistan?

According to Indus Motor Company (IMC), it had protected its customers in H1-FY23 from car price hikes for which it had incurred huge exchange losses but eventually, the impact of rupee devaluation would be passed on to the customers. Local assemblers say car prices are set at a rupee-dollar parity of 285, so if we take this argument we will have to wait & see if the Rupee recovers to that level. Once it does, assemblers will have no excuse but to bring down the prices.

Related: Despite 55% Decline in Sales, The “Big 3” Enjoy 82% Surge in Revenue

But this is Pakistan where consumer rights are rarely protected, so assuming the local automakers will voluntarily announce a price reduction in the wake of PKR regaining its value will be a sheer fantasy. But who knows if there won’t be another increase to offset the dent in profit margins amid declining auto sales in the country, which have already reduced by 55% compared to the previous year.

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