News Analysis |
Indus Motor Chief Executive Officer Ali Asghar Jamali has announced that his company will definitely increase car prices in coming days in the wake of appreciation of the US dollar and Japanese yen against Pakistani rupee since December 2017.
“We will jack up prices soon due to rising value of the dollar and the yen,” he said at a workshop on the automobile sector on Friday, 17th of March.
This will be the second increase within three months as car makers had pushed up prices immediately after the government let the rupee lose over 5% of its value against the dollar in December 2017 in the face of persistent pressure due to a fast widening current account deficit.
At the turn of the New Year, Toyota’s Pakistan chapter Indus Motor Company (IMC) hiked the prices of 1,300-1,600cc cars by Rs. 50,000-60,000 ahead of the new year. The other two of the only three assemblers in Pakistan, Suzuki and Honda, followed suit, with Suzuki jacking up its prices twice in the first quarter, Global Village Space earlier reported.
The new price of Toyota Corolla XLi, GLi and GLi automatic transmission is Rs. 1.81 million, Rs. 1.94m and Rs2.02m compared to Rs. 1.75m, Rs. 1.88m and Rs. 1.96m, respectively. The new price of the 1.6 Altis has been jacked up to Rs. 2.19m from Rs. 2.14m.
The company’s CEO, Ali Asghar Jamali, had attributed the price hike to seven to eight percent rupee devaluation against the dollar, which has pushed up prices of imported components. He said that due to the devaluation of the rupee, the cost of locally produced components, which have imported raw material, has also gone up owing to losing the strength of the rupee.
According to the Pakistan Bureau of Statistics, the import bill of completely-knocked down and semi-knocked down kits for locally assembled cars soared to $329m in July-November from $262m in the same period last year.
Despite the rise in vehicle prices, consumer demand has remained strong across all categories in recent years. According to a survey by Pakistan Automotive Association, Indus Motor’s Tyota Corolla remained the most popular Sedan of 2017. The year 2016 saw more than 0.23M vehicles being sold in Pakistan. The numbers continue to rise each year and a positive trend of 10 to 15 percent annual growth has been observed. More than 0.15M cars and jeeps have been sold in Pakistan since mid-2016. If buses, trucks and tractors are included in the stream, the number crosses 0.2M.
However, in February 2018, Indus Motor lagged behind its peers with a decrease in sales by 8% year-on-year and 5% month-on-month as it continued to face capacity constraints. Cumulatively in the first eight months of the ongoing fiscal year (July-February), sales of the company have been less than impressive, edging up a mere 2%, GVS reported.
The CEO of Indus Motor, the makers of popular Toyota Corolla, also expected local value addition to grow further in coming years that would push up sales volumes.
Read more: Used car imports surge by 70 percent
Citing the example of Corolla, he pointed out that local value addition had increased in the vehicle from 44% in 2008 to 64% in 2017. It had started at 20% when Corolla was launched in 1993.
Though the rising current account deficit and further rupee depreciation may hurt automobile sales in the next couple of years, they were expected to rise past 500,000 units sometime in 2021 or 2022, Pakistan Association of Automotive Parts and Accessories Manufacturers’ (Paapam) former chairman Aamir Allawala told a local publication.
“Owing to robust demand and rising incomes, automobile sales have to grow fast in Pakistan in coming years,” he remarked.
He pointed out that new industry players would also start producing cars from 2019 onwards that supported the expectation that industry production would cross 500,000 units much before 2025. The current low ratio of vehicles in relation to Pakistan’s population is one of the major reasons that are attracting new automakers to the country. Pakistan has 17 cars per 1,000 people while India has 22 cars per 1,000 people.