August 18, 2003	Monday	Jumadi-us-Sani 19, 1424

Buoyed up by windfall bookings, some leading players in the auto industry are dishing out delivery dates for cars eight or nine months later. Development of the abnormal scenario of this genre calls for dispassionate analysis of the underlying factors.

The temperature of the country’s car market has shot up as a result of continuous arrival of excessive home remittances after 9/11 incident. The expats, fearing freezing of their funds from the fiats of the frenzied host governments, have started repatriating dollars, flooding foreign exchange reserves beyond government’s wildest imagination. A part of the huge mass of money is now finding its way to the car market as a viable option of investment.

Some car models carry hefty premiums, oscillating between Rs 100,000 and Rs 300,000.The amount of the premium depends upon the gap between demand and supply. Cashing in on the emergence of unusual situation, the speculators have plunged into the fray, boosting bookings beyond belief.

Reduction in interest rates by the government to attract entrepreneurs to set up industries or expand business has also dissuaded depositors to retain their savings in the tax-loaded national saving schemes. They seem to have steered their direction to car business,to reap windfall profits.

Debut of leasing companies, followed by banks with excessive liquidity, has already made bad situation worse. The free-for-all policy, adopted by the financial institutions to rope in every one to drive away with luxurious cars, if they could manage down-payment, has pushed booking of cars to unprecedented high levels.

Car companies in cahoots with the functionaries of the government are cashing in on the situation with impunity to the hilt. Some are reaping bumper harvest, demanding full price in one go for a car, promised to be delivered nine long months later. The demand for deposits has, however, been lately reduced under the so-called pressure of the government. The demand, though excessive, worked as a safety valve against the influx of speculators, vitiating ambience of the car market.However, retention of the plump amount for a long spell of time, runs counter to norms of business ethics.

Even on this count, auto assemblers are fleecing customers by foisting arbitrary interpretations about the total cost of the car. They even do not hesitate to flout government directives to pay full interest rate to customers, if the delivery is effected after a lapse of two months. What is disconcerting is the fact that the component of sales tax which is to be paid to the government at the time of delivery of the promised car is realized at the time of booking.

Fleecing does not stop there. Customers are made to pay Rs1500 over and above the price of the car, under the so-called head of ‘transportation, transit insurance and delivery charges’ at the time of its physical delivery. Perhaps to avert swapping of uncharitable words at the time of actual delivery, the customers are trapped to sign on the dotted lines at the time of bookings to pay the extra amount virtually as an exit tax.

Rumours are also afloat that car companies are promoting their sales through leasing companies by hastening delivery to their customers at the cost of those, going for bookings directly. If true, it is again open to objection.

Customers also complaint about the price regime operative in Pakistan in disregard of prices prevailing in the neighbouring countries. Availability of cheaper labour and land for factories, ten-rupee fall in exchange rate of dollar and the slashed impost of 35 per cent on completely knocked down (CKD) kits as against 200 per cent duty on completely built-up units (CBU), are not factored into price structure to the advantage of the customer. Customers are now looking to the directive of the Prime Minister, asking the auto-assemblers to reduce prices by the end of the current calendar year.

Quoting prices of the same make and model of the car, prevailing on either side of our eastern border,one is surprized to notice the huge gap in the price of the Suzuki car, for instance, assembled in both countries. Indian Maruti sells for bare Rs200,000 as against Mehran, which is priced at Rs332,000. The lead of 1,3200 cannot be summarily wished away, on the plea, that the Indian rupee is stronger. Confronted with the ‘take it or leave it’ option the hapless customer, viewing no other alternative, succumbs to the host of dictated stipulations of the auto industry, which appears to have ganged up to constitute a cartel, fixing prices and levying charges arbitrarily without any justification. Exaction of hefty amounts from customers and that too under the gaze of a representative government is not a paradigm of good governance and decent dispensation.

The must take cognizance of what is happening in the car market and rein in those involved in the racket.

While there can be no two opinions on the need to protect the interests of the indigenous industry, it’s also not desirable to allow an open field to bete noire to rampage the environ and sacrifice the genuine concerns of customers at the alter of promoting interests of the local industry. The government should find a via media to protect the interests of both the industry and the customer. Unrestricted import of new or reconditioned cars may not be a good solution. But one-time import and that too proportionate to bookings, could be sufficient to smash the logjam.