News Analysis |
Following the devaluation of the rupee against the US dollar, and subsequently other currencies, Honda Atlas Cars has raised prices of its cars by up to Rs. 60,000, following suit with its only other two Pakistani rivals, Toyota and Suzuki.
The company hiked the price of its Honda City 1.3L variant by Rs. 50,000, City 1.5L became more expensive by Rs. 60,000, while Honda Civic’s retail tag also got pricier by Rs. 50,000. The increase means City 1.3L (manual transmission or MT) would be priced at Rs. 1.599 million, while its automatic transmission variant carries a tag of Rs. 1.739 million.
However, the automakers are not too optimistic. The sector will see greater competition in the coming years with the announcement of multiple foreign companies to set up assembly plants in Pakistan.
The new price of City 1.5L (MT) would be Rs. 1.659 million, and City 1.5L’s rate (AT) jumps to Rs. 1.799 million. The new price of 1.5L Aspire (MT) increases to Rs. 1.789 million and the price of 1.5L Aspire (AT) is now Rs. 1.929 million. Honda Civic’s VTI CVT price increases to Rs. 2.399 million, the Civic VT SR CVT is now worth Rs. 2.549 million.
For the time being, the price of Honda BR-V CVT remains unchanged at Rs. 2.229 million. Honda Atlas posts its highest growth, but fails to overtake leaders. Honda’s move comes after Indus Motor raised prices of its vehicles in December, while Pak Suzuki took the step on the first day of 2018.
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Toyota’s Pakistan chapter Indus Motor Company (IMC) had hiked the prices of 1,300-1,600cc cars by Rs. 50,000-60,000 ahead of the new year. The new price of Toyota Corolla XLi, GLi and GLi automatic transmission is Rs. 1.81 million, Rs. 1.94 million and Rs. 2.02 million compared to Rs. 1.75 million, Rs. 1.88 million and Rs. 1.96 million, respectively. The new price of the 1.6 Altis has been jacked up to Rs. 2.19 million from Rs. 2.14 million.
According to the PSX data, the market capitalisation share of Pak Suzuki, Indus Motor and Atlas Honda Cars amounted to Rs. 246.1 billion, down 9.73% from Rs. 272.7 billion in 2016.
The company’s CEO, Ali Asghar Jamali, 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.
Pak Suzuki Motor Company (PSMC) pushed up the prices of different variants of its monopolized products shortly after, in the range of Rs. 10,000-Rs. 20,000, effective from January 1st, 2018. The prices of Suzuki Bolan and Ravi have been increased by Rs. 10,000. Mehran’s VX and VXR variants also get costlier by Rs. 10,000 (price of CNG variants remains unchanged), while Wagon-R VXR and VXL will now be Rs. 20,000 more expensive.
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The new price of Wagon-R’s VXR variant would be Rs. 1.074 million, while the Wagon-R VXL edition is going to be available for Rs. 1.114 million. The rates on Pak Suzuki’s website are yet to be updated. Mehran’s VX model is now priced at Rs. 689,000 and its VXR variant costs Rs. 742,000.
The auto sector has remained one of the best-performing sectors at the Pakistan Stock Exchange (PSX) in recent years. However, similar to the overall poor performance of the stock market in 2017, the auto industry’s returns were also not impressive.
The latest in line, Honda, is expected to render these prices effective from the next batch of pre bookings. The automaker’s move, similar to the predecessors in the price hike, comes as the rupee suffered close to a 5% fall in December, with auto assemblers, operating in a competition-less environment, choosing to pass on the impact within a month.
“The government has recently restricted the import of used cars through different measures, but it has allowed local car makers to increase prices as much as they want,” said All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad.
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The auto industry is particularly sensitive to rupee depreciation because of its high dependence on imported raw-material and parts that become expensive with the fall in the currency’s value. However, the same industry is also well positioned compared to other industries to easily pass on the impact due to high demand of automobiles in the country.
The rates on Pak Suzuki’s website are yet to be updated. Mehran’s VX model is now priced at Rs. 689,000 and its VXR variant costs Rs. 742,000.
Pakistan is all set to touch its highest-ever yearly sales in the calendar year 2017 (final sales figures are expected to be released around January 10th, 2018). In the first 11 months (January to November) 2017, car sales (including light commercial vehicles and jeeps) touched 221,209 units, up 18% compared with 187,495 units in the same period of 2016.
The auto sector has remained one of the best-performing sectors at the Pakistan Stock Exchange (PSX) in recent years. However, similar to the overall poor performance of the stock market in 2017, the auto industry’s returns were also not impressive. According to the PSX data, the market capitalisation share of Pak Suzuki, Indus Motor and Atlas Honda Cars amounted to Rs. 246.1 billion, down 9.73% from Rs. 272.7 billion in 2016.
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However, the automakers are not too optimistic. The sector will see greater competition in the coming years with the announcement of multiple foreign companies to set up assembly plants in Pakistan. Companies such as Hyundai, Volkswagen, Kia and Renault say they will be able to roll out their vehicles from 2019.