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Wednesday, May 22, 2024

Honda raises car prices by 100k but Pakistan has had enough

News Analysis |

Honda Atlas Cars Ltd (HACL), following the trend against its only two existing competitors Suzuki and Toyota, raised the prices of Honda Civic and City by Rs100,000 and BRV by Rs20,000 following devaluation of the rupee against the dollar. It had raised prices in January by Rs 50,000-60,000, resulting in public outrage.

Prominent TV Anchor Rehman Azhar protested via twitter @rehman_azhar:

Auto industry has become the biggest mafia in Pakistan. @Honda @ToyotaPak & other car retailers increase prices by 100k even on booked cars for which received full payment months back.Keeping money of costumers, making them wait for months & charging them more whenever they want.

Various other social media activists and users protested across the social media spectrum to this increase, complaining that these three companies were not providing quality services and charging much more than they deserve.

This is, of course, not a first increase in the prices of these vehicles. The trio has been increasing prices in this fashion for the past few months and in the very first quarter; there have been multiple increments per brand. Pak Suzuki had earlier raised the price in January by Rs 10,000-20,000 and by another Rs 20,000-50,000 this month, GVS earlier reported. Pak Suzuki Motor Company (PSMC) has jacked up the already raised prices of its variants by up to Rs 50,000, effective from March 1st, 2018, which marks the second time the automaker has revised rates in an upward trajectory this year alone, before even hitting the second quarter. Hardly two months prior, the company had raised prices in the range of Rs 10,000-Rs 20,000 in a balancing act against the depreciating rupee.

Read more: Honda follows Suzuki by introducing huge price hike

The assembler of Toyota Corolla also increased the rates on a number of models twice – first in December 2017 by Rs 50,000-60,000 and then in March by Rs 100,000-300,000. Indus Motor Chief Executive Officer, Ali Asghar Jamali, had 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 marks the second increase within three months as carmakers 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.

Read more: Pakistan’s auto industry off to a spectacular start in 2018

Commentators argue that the cars arriving in the next one to two years by new entrants with a low proportion of local parts would be more vulnerable to price increase than the existing car assemblers, despite higher localization.

Justifying the price rise, a leading Japanese car assembler told a local publication that rates of locally-produced cars would remain under pressure in fear of a further devaluation as automobile assemblers are importing over 55pc of their raw material.

The overall production costs are subject to prevailing exchange rates that form the basis of frequent increases in retail prices while the industry’s dependence on imports of essential components such as suspensions, chassis parts, engine, transmission apparatus, brakes etc give rise to further inflation in all aspects, he said.

Read more: Honda: “PSO, Shell, Total sell sub-par fuel”

Country’s auto sector has successfully achieved indigenization in most of its operations, however, the on-the-ground capacity of local parts manufacturers and car assemblers is restricted to the production of auto parts and components like tyres, batteries, interior trim, wheel rims, seats, steel metal parts, rubber, lighting accessories and plastic parts.

The assembler said the auto industry has been endeavoring hard to achieve a maximum indigenization level but these locally produced parts and components are based such raw materials such as resin and metals, which are imported at higher prices from the other countries owing to a weak local currency, coupled with steadily increasing costs of such procurements.

Read more: BMW or motorcycle? Contradictions between the rhetoric and reality of PML-N

Local auto vendors claimed to have achieved localization level in cars of up to 70pc but rising imports of semi- and completely-knocked kits create doubts over high local contents in cars. Country’s parts imports swelled to $518 million in July-Feb 2017-18, up 24pc from $417m in the same period of FY17. In 2016-17, imports rose to $674m from $518m in 2015-16 and $483m in 2014-15.