Karachi: Falling world steel prices, a weaker Japanese currency and low transportation cost on account of drop in diesel prices certainly make a case for cut in car prices. Local assemblers, however, appear reluctant in sharing the benefits with consumers amid robust growth in demand.
Despite severe criticism by the State Bank of Pakistan (SBP) on their business practices and a Rs140 million penalty on their authorised dealers by the Competition Commission of Pakistan (CCP), the assemblers are still operating as a cartel to keep prices high.
The international price of cold rolled products (China) tumbled to $450 per tonne (FOB) in February this year from $621 in January 2014, while the hot rolled rate plunged to $382 from $529 per tonne (FOB). The price of cold rolled (Commonwealth Independent States) dipped to $485 from $609 while the hot rolled product to $406 from $540.
The Japanese yen has depreciated by 25 per cent against the rupee since January 2013, making parts and accessories’ import cheaper.
Diesel price came down to Rs80.61 per litre in March 2015 from its peak of Rs109.34 in August 2014, lowering the cost of transportation and running of big generators by the manufacturers.
While keeping the prices intact of all other models, Pak Suzuki Motor Company Limited (PSMCL) reduced the price of WagonR by Rs90,000 a few months back which resulted in a boost in the model’s demand. The company had also brought at par the price of cars all over the country as previously the rates were high in Punjab due to freight element.
The Indus Motor Company (IMC) is fully cashing the powerful demand for new Corolla whose booking is already going strong.
Honda Atlas Cars has made cosmetic changes in City model to compete with Corolla which resulted in improving its ailing demand to some extent. For example, Honda City price was Rs1.259m in March 2010 and was raised to Rs1.419m in January 2012. On November 2013, it was available at Rs1.562m and on March 2014 its rate was slashed to Rs1.522m. Its price has been unchanged since then.
Honda Civic was available at Rs1.879m in March 2010 and its price was raised to Rs2.058m in 2012. After change in shape, its price was raised to Rs2.332m in September 2012, while its current price is Rs2.388m.
An industry official, requesting not to be named, said it is wrong to say that car makers increase price on every slight depreciation of the rupee. “They only increase prices when it is absolutely necessary since they are cognisant of cut-throat competition in the Pakistani market,” he said.
Last year in March, when the US dollar went down to as low as Rs98, all car manufacturers reduced prices of their products from Rs10,000 to Rs75,000.
The official said CKD kits are imported both in yen and dollar, but major portion of CKD parts payment is done in the greenback as they are purchased from various sources including Vietnam, Taiwan, Japan, Thailand and Malaysia.
“Therefore, the yen has a very small value in cost of cars. The main determinant is rupee-dollar parity. Moreover, yen’s devaluation (from 101 to 107 per dollar) has been overshadowed by rupee’s fall (from 98 to 103 per dollar) in the same period,” he added.
The dollar has risen to around Rs102 now from Rs58 in 2004, while the yen has strengthened to Rs0.85 from Rs0.53 in the same year.
So, from the automakers’ point of view, they are struggling to stay afloat because of the rupee’s devaluation against the two currencies in the past 10 years and the rising costs of inputs — electricity, taxation, wages and other materials.
The official said that since July 2009, the per unit electricity charges have increased from Rs8.22 to Rs16.5 at present, gas charges from Rs302.28 per mmbtu (million British thermal units) to Rs573 and minimum wage from Rs4,000 to Rs12,000.
On late delivery of Toyota Corolla by three to four months, he said most Corolla models were available in a month’s delivery.
The current booking scenario is due to the new-model phenomenon. Every time a new model is launched, all customers want the delivery at the same time. While Indus Motor Company (IMC) asks its customers to say no to premiums, it also takes orders on partial payment and not full payment.
“It is a proven fact that OEM (original equipment manufacturer) is not involved in charging premium to the customer. The industry has already suggested a few measures to the government to curb premium,” the official said.
