Car Prices Are Going to Rise Again in Pakistan
The local auto business is buzzing with rumors of a new round of price increases. The most recent price increase tale occurred in July of this year after a significant increase in the US currency (USD) exchange rate when it increased to Rs. 240 per USD.
History is expected to repeat itself shortly, given the recent weakening of the Pakistani rupee against the US dollar.
Hyundai and Chery have raised their vehicle prices so far, and other automakers are expected to do the same. But will they be more significant than before? Let’s investigate the specifics to find out.
Why Car Prices Are Increasing?
These are the causes of the rise in car costs in Pakistan. The depreciation of the Pakistani rupee, higher shipping expenses, and increases in the price of petroleum and raw materials, according to the representative of the automobile sector, is to blame for the hike in car prices.
The Rupee is Continuously Depreciating Against the Dollar
Following the reinstatement of the International Monetary Fund (IMF) accord, the USD exchange rate started gradually increasing on September 2. It has increased steadily over the past 18 days, approaching Rs. 240.
On July 28, when most automakers raised the price of their autos, the USD rate reached its highest level since that day.
Car manufacturers raise prices by 15% to 20% between late July and early August. Soon after, the companies cut their prices by 50% of the prior increase as a result of the USD’s depreciation versus the Pakistani rupee. Simply said, as the exchange rate improved, the corporations reduced the price of a car by Rs. 250,000 if it had first climbed by Rs. 500,000.
According to earlier market estimates, automakers raised their pricing in response to predictions that the USD rate could rise as high as Rs. 250. The same dire prognosis is made in more recent publications, which would encourage the automakers to raise prices back to those of July.
The decline of the PKR coincided with Pakistan’s regime change, which severely damaged the country’s economy. Following that, inflation broke all records as the cost of everything, even cars, started to rise.
The government then issued a total ban on imports for the car industry, including fully knocked-down (CKD) kits and completely built-up (CBU) units.
Although the government has now allowed imports into the auto industry, it has simultaneously raised levies to deter people from buying expensive sedans and SUVs. Additionally, the State Bank of Pakistan (SBP) has tightened restrictions on auto lending, which has significantly hurt the sales of automobiles.
Increase in Cost of Raw Material
The increase in raw material costs as well as operating expenses is a significant factor in Pakistan’s rising car pricing. Automobile parts and accessories are imported into Pakistan from Asian nations. This year, the cost of raw materials has more than doubled. The rising price of raw materials has increased the cost of manufacturing and shipping autos.
The cost of acquiring raw materials has increased, forcing the automobile industry to once again increase the costs of their vehicles. In the previous few years, the price of vehicles in Pakistan has increased by 50% due to the high cost of raw materials and the growth in production costs.
Automakers are experiencing significant production reductions as a result of the letters of credit for the clearance of CKD imports not being approved. Due to lengthy delivery delays brought on by the restricted supply, the demand for cars has been lowered.
Due to increasing costs and declining demand, sales have been declining for the past few months. The issue could get worse because of the import restrictions, delivery delays, pricing increases, and production reductions.
Increased Freight Rate
Another significant element in Pakistan’s rising car pricing is the rise in freight rates. The price of moving a certain cargo from one place to another is called a freight rate. In just one year, freight charges have increased by more than 250 percent. Almost every business has been impacted by the increase in freight costs, including the auto industry. The US dollar’s strong position on the world market causes an increase in freight rates. As we previously mentioned, Pakistan assembles cars through imports, and as transportation costs rose, so did car prices there.
Pak Suzuki Motors
For the second time in 2022, Pak Suzuki Motor Company (PSMC) announced a significant hike in car prices in Pakistan as of April 1. All of the company’s models, including the Suzuki Alto, Suzuki Wagon R, Suzuki Cultus, Suzuki Bolan, Suzuki Swift, Suzuki Ravi, Suzuki Jimny, Suzuki Vitara, and Suzuki APV, have had their prices increased. The corporation increased the prices from Rs. 1,546,000 to Rs. 1,675,000.
Beginning on March 23, 2022, Indus Motor Company will increase the costs for all Toyota automobiles. The company increased the price of its various models in Pakistan by up to 1,257 million. Toyota Corolla, Toyota Yaris, Toyota Rush, Toyota Fortuner, Toyota Revo, and Toyota Hilux all had price increases by the company.
From March 26, 2022, Honda has increased the price of its vehicles in Pakistan as well. Given that other vehicle dealerships have raised their car prices for a second time this year, it is not surprising. The company has increased the cost of its various models by as much as Rs. 400,000, according to the notification. The cost of the company’s vehicles, including the City 1.5L CVT, 1.5L City Asp MT, 1.5L Asp CVT, BR-V CVT, and City 1.2L MT and CVT models, has gone up.
Following in the footsteps of the Honda Atlas, Toyota Indus, and Pak Suzuki, Hyundai Nishat has increased the price of its automobiles. Hyundai has increased the pricing of its three models, the Hyundai Porter, Hyundai Sonata, and Hyundai Elantra GLS.
The cost of the company’s Hyundai Tucson FWD and AWD has also increased. The cost of its most well-liked automobile increased to RS 400,000. The new car costs will be in effect as of May 5, 2022, according to the business.
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