KARACHI, May 4: Premiums on newly assembled cars are again touching the roof owing to late delivery of cars by the assemblers and galore of new models in the market, which is infusing a renewed buying passion among customers.
Market players and even assemblers think that the menace of premium on new models is likely to dominate the market in the current year with the same tendency since the demand and supply gap still wide.
Premium on Toyota Corolla is being charged at Rs125,000- 150,000 as compared to Rs100,000 two weeks back, while premium on new automatic Daihatsu Cuore is being demanded at Rs60,000.
Indus Motors, with the exception of new automatic Cuore, has already suspended the booking of new Corolla models two week back. Buyers who had booked Corolla prior to suspension of booking, would have to wait for at least five to six months to get a new car. In some versions, the delivery period goes beyond six months.
Premium on new Honda Civic, which was launched last month with increased price of Rs20,000, now also ranges between Rs125,000-150,000 as compared to Rs100,000 two weeks backs.
The on money on Suzuki Cultus is being charged at Rs25,000 but in some models and colours, dealers are demanding Rs45,000. Two weeks back, premium on Cultus was ranging between Rs15,000- 20,000.
Customers can get the delivery of Cultus by September if they book today. Premium on Mehran 800cc ranges between Rs10,000-20,000, while on Alto 1000cc, the on rate is Rs10,000-30,000 depending on the model and colour.
According to the chairman, All Pakistan Motor Dealers Association (APMDA), HS Shahzad, the rate of premium on Honda City is tagged at Rs90,000 as compared to Rs40,000 two weeks back.
In a letter to Finance Minister, Shaukat Aziz, he said it was expected that the situation in car market regarding premium and late delivery would improve after April 12 meeting with assemblers in Islamabad, but no change was witnessed yet. He urged the finance minister to open import of cars.
He said that the issues of high premiums and late delivery of cars had not been addressed by the assemblers despite achieving over 70 per cent car production in every month.
On the other hand, assemblers do not agree that the market situation relating to high premiums and late delivery is so pathetic, as portrayed by the used car importers' body.
"The demand and supply gap is closing and these issues will not stand any more after six months," chairman Pakistan Automotive Manufacturers Association (PAMA), Kunwar Idris told Dawn on Tuesday.
He was of the view that most of the newly assembled cars are now being handed over to the customers in two to three months except for a few models which were being delivered in five to six months.
PAMA chief did not agree that the premium rates had been flying very high these days. He, however, agreed premium on new cars still exists but it was in the narrow range of Rs10,000- 40,000.
He said it was not the investors who had already devastated the car market but currently a lot of "ordinary people" were now making huge bookings of new cars. Even housewives had also become active in grabbing a new Sedan to make timely profit.
Despite these facts, he said, the situation in car market was now stabilizing since the local car industry had increased their production capacities to bring the demand and supply gap closer.
He said that the advent of used cars would definitely prove fatal for the local car industry which had already put up huge money in various expansion plans. Even the car industry also did not really support the import of completely built up (CBU) cars.
He said he could not say whether the government would really allow import of used cars because everybody had opposed the used car import. "I cannot say whether the government will do it or not as the issue has been lingering on for the last one year," he said adding that there was hesitation on the government's part too.
Kunwar Idris ruled out the possibility of increasing the car prices by the assemblers despite the fact that the car makers were absorbing the negative impact of rising steel products prices. Assemblers had not made any increase in car prices for the last two years despite various adverse situations.
However, a senior executive in a leading car industry said that the car assemblers are now in a fix whether to increase the prices in view of rising steel prices or continue to absorb it.
He said that the price of steel sheets, being imported from Germany, Japan, Taiwan and Korea, had become costlier by 27-30 per cent after the worldwide steel crisis.
Even the local vendors were exerting pressure on assemblers to raise the component prices, but car makers had been dilly-dallying in this regard. He said the car industry had been absorbing the recent rise in cost of production despite government's demand for price cut.
He was of the view that the year 2003-2004 had seen a demand and supply gap of only 15,000 cars which was expected to be shrunk by June 2004-2005. Car analysts said that the chances of opening used car imports seem remote.
They said that there was a possibility of liberalizing new car imports followed by cut in import duty on completely knocked down (CKD) kits in the budget 2004-2005 to provide incentive to the local car industry.
However, they think that the industry would continue to remain over-protected because import duties on new cars would be slashed in such a way that imported cars would remain costlier as compared to locally assembled cars, leaving a little room for the buyers to ponder twice before its purchase.
