Rupee Slipping Again- Will Car Prices Go Up?

After witnessing a recovery by up to 16%, the Rupee is once again losing its value slipping to Rs 221+/- against the US Dollar. Sparing Kia and Hyundai, most of the automakers between 15th and 20th August had announced the reduction in prices, however since the 16th of August, Pak Rupee has so far witnessed 3.75% decline with immediate recovery not in sight according to analysts.

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The start of  the new fiscal year hasn’t been too good for the local auto industry. Sales including those of non-PAMA members suffered from a 59% month-on-month decline. Assemblers already anticipated approx 30% drop in sales in fiscal year 2022-23 due to uncertainty after the increase in withholding tax on filers and non-filers, imposition of 1% capital value tax on vehicles exceeding 1,300cc, strict auto financing rules to compress demand, high interest rates and more price shocks ahead.

TDM Showroom

Automakers also had to suspend the bookings & observe non-production days due to unavailability of CKD kits in hand. Owing to looming foreign exchange crisis, the SBP’s decision to disallow the opening of letters of credit (LCs) for the import of parts and accessories had put a dent on vehicle assembly operations.

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Although some assemblers have announced to resume bookings, there is a huge question mark on pending orders with deliveries slated to occur after several months. However if Rupee continues to slip against the US Dollar, assemblers won’t spare any chance to transfer the price impact on the consumers.

Reduction Car Prices

If you remember, in July 2021 car prices were reduced due to government’s cut on various taxes however the benefit never reached the consumers since automakers were quick to increase the prices soon after. This echoed the forensic audit’ threat from the government and free market’ response from assemblers. Similar situation might repeat again since the bookings of new vehicles were closed, the reduction in prices are yet to give any meaningful benefit to the buyers. But if Rupee continues to slip, assemblers will once again increase the prices which the customers will have to bear eventually. And as discussed earlier, the delays in deliveries are sort of a blessing in disguise for the local automakers.

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The question is, will the car prices go up again due to weakening Rupee value against the US Dollar? Let us know about your thoughts in the comment section below.

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