Prices of locally-assembled cars continue to rise

At the beginning of every year the local auto assemblers tend to
increase the car prices on pretext of rupee depreciation against yen and
dollar, rise in steel prices and Complete Knock Down (CKD) and various
other reason.

The year 2010 dawned with the popular Pak Suzuki revising its prices up
by Rs10,000 to Rs25,000 on its various models in January. Indus Motor
Company increased its prices by two per cent or Rs20,000 on the popular
1300cc XLi and Rs30,000 for the GLi in February 2010. Honda kept with
the trend and upped the price tags by Rs20,000 to Rs35,000 on its
various models.

Atif Zafar Auto Analyst at JS Research says that the rising prices of
raw materials, utilities, and other inputs along with the weakening
rupee has forced the auto assemblers to pass on the cost pressure to
consumers.

He said that the price increase of local assemblers would not have much
affect on the auto sales because Toyota and Honda cars are usually for
people who can bear the price. However the increase in the prices of
800cc and 1000cc cars affects the middle-income groups.

The price rise follows demand for opening imports of used cars. All
Pakistan Motors Dealers Association president H M Shahzad says that the
price increase by local auto manufacturers is unjustified.

Lac of competition has given the local assemblers a free hand in the
local automobile market, Shazad said adding, "people don't have much
choice."

He further added that government should allow import of used cars, relax
duty structure, allow two per cent depreciation, and used car import
policy should be the same which was in the year 2006-2007. Taking these
steps would give consumers more choice to select ave various range to
choose from and it will break up the local assemblers monopoly.

While local assemblers' stance is different on the issue and they
justify the price increase and said that there is a misconception that
the local auto industry is continuously and unjustifiably increasing
prices.

This is unfortunate and far from reality. From October 2009 till date
Pakistan rupee has depreciated over five per cent against yen and in
addition, there have been increases in wages and utility prices. All
these factors have forced the local OEMs (Original Equipment
Manufacturers) to marginally increase car prices while absorbing most of
the costs, which has squeezed their margins and reduced profitability.

Prices of locally-assembled cars continue to rise