As the market waits for the launch of the new Honda City, Honda Atlas Cars Pakistan Limited increases the prices of all variants, according to a letter dated May 4 and addressed to all its dealers.
“Keeping in view the increase in forex [dollar rates] and its impact on CKD [Complete Knocked Down kits] and other parts, HACPL is compelled to increase the prices of Honda cars with effect from May 5,” the letter read.
Honda City (1.3 L, Automatic) will become Rs65,000 more expensive and sell for Rs2,574,000. Its ex-factory price that doesn’t count other costs (withholding tax, freight and insurance etc) involved in bringing it on the road. Civic’s 1.5L Oriel variant will cost Rs4,349,000 after an increase of Rs100,000.
The letter says new prices are applicable on all bookings received from April 23 onwards. The current price (as on May 4) is applicable on old orders with full payment as on April 22, it said. Deliveries for previous orders with partial payment as on April 22 will be made on the new prices. It said that the rates are based on the current exchange rates and any hike may result in a further increase as well.
The market has been waiting for the arrival of the new Honda City, which was expected somewhere between August and December before the Covid-19 contagion forced a countrywide lockdown. Given the price increase, the new City model is going to cost more even before its launch.
This decision comes three weeks after Indus Motor Company, the makers of Toyota cars in Pakistan, raised its prices. The company cited the rupee’s devaluation from Rs155 to a dollar to Rs167 as the reason.
On March 27, the dollar rose to an all-time high of Rs169 before a central bank intervention brought it down to Rs167 the same day. It has been falling since.
Analysts say when the dollar becomes expensive, carmakers increase prices because they import up to 60% of their parts, which are paid for in dollars. However, Honda’s price increase comes at a time when the dollar has fallen sharply. The greenback fell to Rs159.5 on April 22, then a one-month low, and has been staying at that level since then.
Car plants of all automakers are shut because of the lockdown and their inventories remain unsold. The sales of the auto sector plunged 70% this year compared to the corresponding period of 2019. In the case of Honda, the year-on-year decline in sales is 96%.
Both IMC and HACPL raised prices at a time when the economy is slipping into a recession as the GDP growth forecast is negative 1.5% for the fiscal year ending June 2020.
Analysts say traditionally the automaker’s strategy has been to protect profitability. By raising prices, they try to keep profit margins normal so they can remain in profit.