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Friday, February 16, 2024

Why are car prices so high in Pakistan?

Why are Pakistanis being robbed of the means to transportation via high prices in the car industry, when the economic indicators are going positive, the taxes are slashed and the government is supporting the auto industry of Pakistan?

As the automobile industry of Pakistan grows, it has come bearing bad news for the people of Pakistan in the shape of increased prices for automobiles in Pakistan. Car prices have gone exorbitantly high over the last couple of years, making them out of range of the mass population of Pakistan.

There are many things that have led to this increase in prices, such as increased taxes on the industry over the past couple of years, including withholding tax.

Similarly, another reason that is usually stated is the increased dollar value, as Pakistan’s automobile industry is focused on assembly rather than production, leading the industry to be import reliant, hence the impact on prices.

Automobile Sector of Pakistan
Source: ProPakistani

The prices between 2017 and 2021 are given below:

Car 2017 2021 Percentage difference
Honda City 1.3 M/T 1,549,000 2,449,000 58.10
Honda City 1.3 P/T 1,689,000 2,639,000 56.25
Honda City 1.5 M/T 1,599,000 2,529,000 58.16
Honda City 1.5 P/T 1,739,000 2,699,000 55.20
Honda City 1.5 Aspire M/T 1,729,000 2,699,000 56.10
Honda City 1.5 Aspire P/T 1,869,000 2,859,000 52.97
Honda Civic 1.8 CVT 2,349,000 3,729,000 58.75
Honda Civic 1.8 CVT Oriel 2,499,000 3,979,000 59.22
Honda BR-V CVT M/T 2,229,000 3,159,000 41.72
Honda BR-V CVT-S 2,329,000 3,479,000 49.38
Toyota Corolla 1.6 Altis 2,149,000 3,369,000 56.77
Toyota Corolla 1.8 Altis M/T 2,224,000 3,549,000 59.58
Toyota Corolla 1.8 Altis CVT 2,349,000 3,699,000 57.47
Toyota Corolla 1.8 Altis Grande CVT 2,549,000 3,979,000 56.10
Toyota Fortuner 2.7 Petrol 5,399,000 7,999,000 48.16
Suzuki Cultus VXR 1,250,000 1,780,000 42.40
Suzuki Cultus VXL 1,391,000 1,970,000 41.62
Suzuki Cultus VXL AGS 1,528,000 2,130,000 39.40
Suzuki Swift DLX M/T 1,327,000 2,030,000 52.98
Suzuki Swift DLX A/T 1,463,000 2,210,000 51.06
Suzuki WagonR VXR 1,054,000 1,640,000 55.60
Suzuki WagonR VXL 1,094,000 1,730,000 58.14


Source: Pakwheels

In an interview to a national media outlet, Mr. Sohail Bashir Rana, the chairman of the Pakistan Automotive Manufacturers Association (PAMA) said, “When we come to the local industry, the raw material and parts are expensive due to the dollar rising. Federal excise duty is imposed on the finished products, then that is followed by sales tax which makes the overall price high.”

Read More: Here are the new car prices after the 2021-22 budget!!

Mr. Rana told the media agency, that even in the case of the cars being manufactured in Pakistan, the raw material is being imported. There is no locally made metal sheet for the car and it is imported along with several body parts. Even the steel mill products were not up to the mark and were not of acceptable quality.

So, just to put this in perspective, in 2017 Pakistani Rupee was steady at Rs104 against the US dollar, and on 24th June 2021, the dollar costs Rs158.48 Pakistani Rupee.

Thus, according to the PAMA chairman, it is the taxes along with the increased import prices due to the government’s anti-import policies to balance the balance of payments, which leads to such a high price.

However, there is another burden on the consumer in the form of a premium paid to the dealers for buying cars right away, and dealers earn money through it, however, it causes the total cost of the car to rise in the market.

This ‘on’ is quite infamous and has been rampantly critiqued by the government and other actors in the market for being unfair to the consumers who can’t pay, and the government has been working towards deterring such practices in the market.

Similarly, the upcoming Auto Policy 2021-26 is reportedly focusing on bringing production to Pakistan and incentivizing Green Investment in Pakistan. Along with this, the government in its recent budget has made cars smaller than 850cc cheaper by slashing FED on locally assembled cars.

The sales tax on this category has also been reduced by 4.5 per cent, down to 12.5 per cent, making these cars hopefully more accessible to the majority.

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

On the other hand, new entrants in the market will hopefully make the auto market more competitive driving the automobile prices down and easing the burden on the buyers.