The auto sector, with the exception of the bus segment, experienced a significant decline in sales ranging from 28.4% to 56.5% during the first half of 2022-23. It has a log lasting impact on the purchasing power of the people as well as on the economy of Pakistan.
Automobile prices in Pakistan have been on the rise in recent years for a number of reasons. The depreciation of the Pakistani rupee, increased import prices, and higher taxes and tariffs are three major contributors.
According to data from Pakistan Automotive Manufacturers (PAMA), a decline of 59% was recorded in Toyota Corolla and Yaris sales to 12,065 units from 29,126 in 6MFY22.
Factors such as rising prices, high-interest rates making leasing more expensive, curbs on auto financing, and non-opening of letters of credit resulting in parts shortage leading to production halts by various assemblers, and late delivery in Japanese models resulted in the decline of car sales.
Additionally, the change of model year also resulted in buyers slowing down purchasing of vehicles, which led to a decline in car sales in December 2022 to 13,768 units from 15,432 units in November.
Let’s see how companies are amending the prices of vehicles:
Honda Atlas Cars Ltd (HACL) has raised the prices of several models by between Rs300,000 and Rs550,000, citing uncertain economic conditions, inflation in material costs, and volatility in foreign exchange rates.
The new prices for models such as the Honda City MT 1.2L and CVT 1.2L, BR-V S, HR-V VTI, and HRV VTI S, Honda Civic 1.5L M CVT, Oriel M CVT and 1.5L LL CVT, among others, have increased due to the mentioned reasons.
Indus Motor Company (IMC) also increased the prices of Toyota vehicles by between Rs280,000 and Rs1.2m in the second week of this month. The sales of Suzuki Alto 660cc in the less than 1,000cc category remained slow, declining by 15% to 27,614 units in 6MFY23 from 32,388 units.
On the other hand, the new model of Suzuki Swift posted robust sales of 7,136 units from 497 units in 1HFY22 despite a decline in December sales to 1,428 from 2,242 units in November.
Similarly, Bolan sales recorded a 61% decrease to 2,436 units from 6,241 units in 6MFY22. Alto and Bolan sales in December 2022 were 6,898 units and 464 units respectively, as compared to 7,252 units and 503 units in November.
Total sales of Jeeps and Pickups were 28.4% lower than 15,188 units in 6MFY23 as compared to 21,202 units in the same period of last fiscal year, although December 2022 sales increased to 3,216 units from 3,099 units in November.
Toyota Fortuner and Revo sales fell by 30% to 6,242 units in 1HFY23 from 8,946 units in the same period last year. Total bus sales of PAMA members grew by 23% to 320 units from 260 units in July-Dec FY22, while truck sales, a barometer of the country’s import/export, decreased by 42% to 1,627 units from 2,802 units in 6MFY22.
Also, Suzuki Ravi sales are decreased by 69% to 2,273 units from 7,432 units. The sales of Sazgar Haval and Cherry Tigo, new players, stood at 442 and 706 units in 1HFY23. JAC X-200, Isuzu D-Max, and Hyundai Porter sold 345 units, 132 units, and 567 units respectively, as compared to 479 units, 253 units, and 808 units, who represent a decrease of 28%, 48%, and 30% respectively, compared to 6MFY22.
In the current crisis in the auto sector, Hyundai Tucson depicted a 69% increase in sales to 2,230 units in 6MFY23 versus 1,321 units in the same period last fiscal year, due to discounts on registration and immediate delivery options.
Supply chain interruptions, natural calamities, and changes in government policy are all potential short-term causes of increases in the cost of automobiles.
For instance, if a sudden scarcity occurs in a component used in the assembly of automobiles, producers may need to charge more for their products to compensate for the higher cost of the substitutes.
A natural calamity, such as a storm, might also destroy an auto plant or the highways needed to carry them, causing a temporary scarcity and increased pricing. Short-term price increases may also result from a shift in government policy, such as a rise in tariffs, taxes, or import levies.
Inflation, changes in customer tastes, and technological progress are all examples of the kind of long-term trends that may contribute to price increases in the vehicle industry. Manufacturers may have to boost prices to account for, say, the rising cost of raw materials.
It’s worthy to mention, when demand rises for innovations like electric drivetrains and autonomous driving systems, manufacturers may raise costs to cover the additional development and manufacturing expenses. It’s also important to remember that taxes and regulations might have a role in long-term automotive price rises depending on the location and the kind of automobile.
As a result, many people in Pakistan are now priced out of buying brand-new cars. Sales of new automobiles have dropped as a result, and more individuals are buying pre-owned vehicles. More people are taking out car loans to cover the high cost of vehicles, which may have a chilling effect on the economy as a whole.
Statistics credit: The Dawn