Rupee Recovers Against Dollar- Will Car Prices Come Down?

The rupee gained 30 paisas against the Dollar on Thursday to close the session at a 5-month high of Rs 161.82 ($1) in the open market, according to the data released by the Exchange Companies Association of Pakistan (ECAP). This renders a 3.9% improvement compared to the low of Rs 168.43 earlier in August.

Related: Are Local Assembled Cars Really Dependent on Dollar Rate?

The ECAP Chairman Zafar Paracha while speaking to Dawn, said:

“The Dollar is likely to hit Rs 160 by December of this year, mainly on account of declining imports and a significant jump in remittances.”

The rupee’s appreciation comes on back of a record current account surplus of $792 million in the first quarter of the current fiscal year, as reported by the State Bank of Pakistan on Wednesday. Higher inflows — to the tune of $2 billion per month over the last four months in the form of remittances — and lower outflows due to lower oil imports; debt suspension by the G20 countries; and a rebound in textile exports have helped stabilize Pak Rupee.

Now the question is, will auto assemblers bring down the prices of local assembled cars or at least revert the latest price increase? Unfortunately this has always been the case that local assemblers never let go of a chance to revise the prices even in the slightest of variation in Rupee-Dollar parity. But when the Rupee appreciates, there is no reduction in prices whatsoever, in fact Toyota and Suzuki have recently pushed the prices up despite an upward trend in PKR’s strength.

Related: Should Local Assembled Cars be Priced in Dollars?

Even last year, from June 2019 the Rupee regained its strength back and recovered by 6% to Rs 154 against a Dollar and stood stable for nearly 4 months there. Instead of reducing prices, local assemblers kept pushing up the car prices even further which was largely attributed towards dampening the declining profit margins. Then again on the eve of New Year 2020, car prices were given another substantial push even when there was no Rupee-Dollar depreciation as well as no additional duty or tax imposed by the government.

Perhaps all we can do is to wait and see after this recent recovery of Pak Rupee against the US Dollar, whether car prices in Pakistan are going to come down or will they be pushed up even further?

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