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Pakistan car sales plummet but prices soar

Automobile assemblers waiting for govt policies to ease, say experts

SAMAA | - Posted: Jan 1, 2020 | Last Updated: 1 year ago
SAMAA |
Posted: Jan 1, 2020 | Last Updated: 1 year ago
Pakistan car sales plummet but prices soar

The prices of cars in Pakistan increased by as much as 29% in 2019. This was despite the fact that sales plummeted by almost as much in the same period, with thousands of unsold units parked idly in warehouses, gathering dust.

The industry sold 32,504 fewer cars—Corollas, Citys and Wagon Rs— in Jan-Nov 2019 as sales dropped 33% compared to the corresponding period of the preceding year. Experts cite the FBR’s active campaigning against non-filers, which has most likely discouraged black money from entering the auto sector.

By theory, falling sales should have resulted in a drop in prices, but wasn’t the case. The prices of cars couldn’t be controlled, particularly due to two reasons: the imposition of between 2.5% and 7.5% in Federal Excise Duties coupled with additional Customs duties and the depreciation of the rupee, which fell 11.5% in 2019. A stronger dollar made imports more expensive for the auto sector, which import 50% to 70% of its parts from abroad.

“The overall market situation at the moment suggests that auto assemblers are bluffing,” said an auto dealer, explaining that they are waiting for the government’s policies to ease. “The show of hands will go either way. Either the market will pick up and FBR will withhold its stringent policies on trade or the assembling units will further cut down on production days and lay off employees to meet their expenses.”

The preceding year saw Pakistan face a host of challenges on the economic front but the same year culminated with half of them—the balance of payment crisis, current account deficit and near default stock market performance—taken care of already.

However, a market expert said the handling of some issues, with IMF support and foreigners buying in our treasury bills, has only bought us some breathing space. Many key issues and crises are still hovering over us and stifling our economic growth, said the expert, warning that we should not grow complacent.

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