Last 2 years Increase in car prices highest ever in history

[Lahore_Real_Estate]

By Moonis Ahmed

KARACHI: The local car manufacturers are exceeding the limits of increasing their car prices in parity with the local rising inflation to earn hefty profits, Daily Times learnt on Tuesday.

While compiling the data of nearly two years (January 2008 to March 2010) this scribe found out that the local car manufacturing companies have raised the prices of their products almost 10-15 times. During the said period the three leading automakers including Honda, Suzuki and Indus Motors have raised the prices by 15 times up to 68 percent.

Pak Suzuki Motor Company Limited has raised the prices 15 times on all of its models in the said period, as the company in 2008 had raised the prices 6 times, in 2009 it again raised the prices 6 times and till March 2010 the company raised the prices 3 times. Another leading auto manufacturer, Honda Atlas Motors Company Limited also raised the prices by 10 times in the said period up to 66 percent. The company had raised its prices 4 times in 2008, 5 times in 2009 and till March 2010 raised the prices once. Similarly, Toyota Indus Motors Company Limited, another market leader had taken its prices up by 13 times up to 60 percent during January 2008 to March 2010. It increased the prices 7 times in 2008, in 2009 the company increased the prices by 4 times and till March 2010 it raised the prices by twice.

On the contrary the car sales remained depressed in 2008 and significantly low in 2009, as sales fell by 28 percent to 107,704 units during CY 2009, which is said to be the worst performance during the last 10 years.

Topline Securities analyst Furqan Punjani said, “Inflation went up by 33 percent from the index of 163 in March 2008 to 217 in February 2010 and a 26 percent devaluation of the rupee against the dollar and 39 percent devaluation against yen.” In January 2008 the dollar was quoted at Rs 61.98 and the yen was at 55 paisas and now the dollar is being traded at Rs 84.00 and the yen is at 91 paisas. He said that the two years were very difficult for the auto industry amid global financial crisis coupled with severe pressure on the cost side.

“The soaring prices have badly affected the common man’s buying power, thereby affecting all segments of the industry,” he observed.

He said that the sales’ performance was affected due to slowdown in car financing, as banks were reluctant to issue fresh loans amid risk aversion and chances of higher non-performing loans due to the economic slowdown.

Besides this, higher mark-up rates, contraction in disposable income due to higher inflation and heightened security concerns restricted consumers to buy new cars. Interestingly, despite reduction in federal excise duty, car prices remained almost flat in 2009. This was primarily due to consistent cost pressures amid rupee devaluation, rebound in steal prices and increase in sales tax. In other regional countries like India and China the prices are comparatively 3 to 4 times lower than Pakistan.

All Pakistan Motor Dealers Association Chairman H M Shahzad urged the government to check whether these increases by the assemblers were really justified with the actual impact of the falling rupee, rising metal and steel sheet prices and petrochemical items.

Besides, these high prices on cars hefty amount of own money is also being charged from the customers, he said and added that on all models of Suzuki own money was ranging between Rs 40,000 to Rs 200,000. On IMC cars own money was between Rs 30,000 to Rs 60,000 and on Honda cars Rs 30,000 to Rs 80,000.

Shehzad said that semi-knocked down and completely knocked down kit prices all over the world had fallen. He was of the view that there had not been any check and balance over the price hike of the local manufacturers by the government. He urged the government to reduce the taxes on imported vehicles. “Importers are paying 360 percent overall duties as compared to 120 percent in 2007-08.”

He said that the automakers were taking full advantage of the customers as such high duty on import left the customers with no any other option than to buy locally manufactured cars during the last two years.