Dollar is coming down, but the car prices are going up, why?

Despite the continuous trend in the appreciation of the rupee since August 2020, car prices refuse to go down. Reasons include high taxes and stubborn manufacturers who increased prices when the dollar was going up, but won't reverse when its falling.

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Most people know that car prices have skyrocketed over the past years, and word in the market is that it is because of the rupee devaluation. However, recently the dollar has gone to the lowest it has been in two years.

This must mean that the car prices must go down as well. However, that might not be the case. Today, the US dollar is at the same rate as it was in June 2019, but the car prices are different.

The dollar rate is on a continuously dropping trend since August when it reached 168.58 PKR for a dollar. However, the car prices have gone in a completely other direction.

So, keeping in mind that today, the dollar rate is exactly the same as two years ago, that is, 1 USD equals 152.58 PKR, let’s compare the prices.

Pakistan car prices

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According to the above prices, keeping the exchange rate constant at 153, the average car price increased by 26.1 percent or 6 lac rupees.

The highest percentage increase in price was seen in the Suzuki Vitara GLX AT, with a 58.9 percent increase in price from 4,090,000 to 6,500,000 over two years.

On the other hand, the smallest increase in price was in Toyota Corolla Altis 1.6 AT, where the price increased 9.78 percent, meaning 3 lac rupees from 3,069,000 to 3,369,000.

Among the Big Three Japanese car manufacturers Toyota, Honda, and Suzuki, Suzuki saw the biggest price hike. The average price increase for Suzuki vehicles was 33.1 percent, compared to 27.7 and 18.9 percent for Honda and Toyota, respectively.

The automakers are always looking for an opportunity to increase the prices of the vehicles upon the slightest fluctuation in the value of the dollar. However, they have all been silent despite a significant decline in the value of the dollar.

Automakers have to rollback on prices, as most of Pakistan’s population needs affordable transport to fulfill their needs. Thus, the government and the sector itself have to work on deciding on new prices for the car.

According to a media report, the real cause behind the high prices is the exorbitant taxes on cars. At least 40 percent of the retail value of the locally manufactured car is taxes.

The value includes at least seven taxes and levies, namely customs duty, additional customs duty (based on engine size), income tax, general sales tax, federal excise duty, withholding tax, and registration tax.

“A conventional 660cc carries up to 73 percent of taxes on completely knock-down. Likewise, a new 1,800cc vehicle should be available at Rs2.3 million to the customer if it does not carry taxes of Rs1.6 million,” the report says.

Read More: Government’s priority is to control the prices of necessities-Minister

This leaves the poor people with fewer choices, as cars are priced beyond affordability. Let’s see if the new auto policy which is to be applied after June 30th offers the poor people a chance to own a means of transport.

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