Should Car Prices Be Further Reduced?

Prices of local assembled cars witnessed a decline for the first time in many years thanks to government’s decision to slash various taxes imposed on locally assembled vehicles. Majority of automakers have already announced their price revisions which range from Rs 50,000 to up to Rs 400,000 depending on the model.

Related: Car Prices Reduced Amid Tax Cuts

While reduction in car prices is indeed a welcome move, there are a lot of people who believe prices should be decreased even further. Although government has played its part by abolishing various taxes, assemblers should also lower their margins amid reduction in Rupee-Dollar parity. Car prices in Pakistan were revised quite frequently during the last couple of years with automakers citing forex fluctuations as the primary reason behind the increase in prices. Rates were revised even in the slightest of fluctuations till Rupee reached a record low of Rs 168 against a Dollar.

However since August 2020, PKR continued to recover by more than Rs 13 against the USD rendering a 10% improvement in its value by January 2021, but sadly car prices were not reduced. Although Rupee stands at Rs 159+/- against a Dollar today, its still shows improvement considering the low of Rs 168 it reached last year.

Related: Car Price Comparison: When Dollar was Rs 152+/-

And if we think forex stability is essential for pricing a locally assembled automobile, the rates should not even go up in the first place since Rupee reached Rs 168 against a Dollar for a relatively shorter period of time.

According to analysts, the reason why automakers aren’t reducing the prices is the huge increase in freight costs after the pandemic. So automakers tend to dampen the decline in profits they suffered during last year due to low sales amid  COVID-19 lockdowns. However sales are now recovering fast with automakers back on track to post healthy quarterly profits.

Related: Car Prices Will Always Increase

Courtesy tax cuts, the decrease in prices is expected to bring positive results for the auto industry, however if prices are reduced even further, sales are likely to witness a massive increase. Do you think local assemblers should announce a further reduction in car prices? Let us know with your comments.

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