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Pakistan: Car prices likely to increase by 2-3 percent in September 2010

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By Moonis Ahmed

KARACHI: With rising rupee-yen parity (Yen appreciated by 7 percent against rupee in quarter ending June 2010), all car assemblers have once again muscled up for price increase.

According to analysts, after discussion with industry the conclusion came out that car prices may increase by 2 to 3 percent in the next few days on different models of Pak Suzuki and Indus motors.

It is worth mentioning that Pak Suzuki has already increased car prices of Jimny and APV last week. This partial impact of yen would provide assemblers some cushion to declining gross margins. The expected increase in car prices would be on top of the price increase witnessed in April’10 (by 2-3 percent). As far as volumetric sales are concerned, the sector has started feeling the heat of floods as car demand and premiums on spot purchases have declined.

Car prices may be raised in the range of Rs 30,000 to 50,000 a unit to offset the impact of the rising yen and protect assemblers margins, sources told Daily Times.

They also said another reason that is compelling manufacturers to increase prices is raw materials of the auto industry that has also spiked steeply in the past few months – putting immense pressure on auto makers worldwide.

It is interesting that the government is putting pressure on the car assemblers to cut their prices to make them affordable for more people, or it has given hints to open import of used cars.

It is pertinent to mention that the domestic auto industry that had witnessed a 67 percent drop in volume over the last couple of years, bounced back in 2009-10. The industry demand for the locally manufactured Passenger Cars (PC) and Light Commercial Vehicles (LCV) grew by 43 percent to 141,654 units as compared to 99,310 units in 2008-09. The overall production increased by 37 percent to 138,587 units versus 101,400 units produced in the corresponding period of 2008-09.

A sharp rebound in demand is mainly attributable to the combined effect of healthy agricultural income in the farming community and marginal increase in auto financing coming on top of the low volume base in the comparable period of 2008-09, which suffered from the dampened demand due to the extraordinary difficult economic conditions in the country and the absence of corolla which was only partially present because the “old model” had run out last year.\09\01\story_1-9-2010_pg5_2

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