THE rising prices of locally assembled cars and the automakers’ decision to focus their efforts on well-off customers is cause for concern. A report in Dawn has shown that the prices of locally assembled cars have risen by 70 to 80 per cent in most categories over the last five years. In addition, most assemblers have chosen to phase out their offerings in the 1000cc or less category, and have instead expanded their range in larger engine sizes and SUVs. This is problematic especially when one considers that in the last financial year, the auto industry posted record high profits. One assembler for example, posted an annual increase of 60 per cent in its after-tax profit, a stellar performance considering the times.

Granted the auto industry took a hit in the first half of the present year, largely on account of the increase in the age limit of used cars from three to five years, and the reduction of 25 per cent in custom duties on hybrid vehicles. But the fall in sales spurred by the rush of used cars into the market is likely to prove transitory now that the decision on used cars has been revoked. The auto sector is likely to return to a path of high profitability in the second half of the financial year. Since the sector’s profits are built on heavy protections provided by the government — at the cost of consumers — it is a matter of public interest to determine whether or not the assemblers are upholding their end of the bargain. Going by the evidence — rising prices, growing focus on larger, elite vehicles — it appears that far from seeing themselves as investors with a stake in the public interest, the auto assemblers are simply making hay while the sun shines. The next government will need to find a way to rectify this by advancing the stalled matter of an auto sector policy.

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Comments (9)

Fuzail Z. Ahmad
March 19, 2013 10:10 am
Nice editorial. Because of the economic problems, Pakistanis generally have to lower their SOL (Standard of Living). That's because of rising value of Dollar, Pak economy has to adjust itself and SOL is the first victim. Economics says that's an adjustment process to make Pakistan find it's equilibrium SOL. Till this equilibrium SOL is found, Pakistanis will unfortunately keep facing a reduction in their overall standard of living. Not only cars, Hajj and Umrah costs will also become unbearable for middle income and lower strata, and that's also a part of the adjustment process. Rich people find their way out legally or illegally, but not others. Equilibrium will occur when our forex balance of payments will turn surplus.
March 19, 2013 11:46 am
The automobile assemblers in Pakistan do extreme lobbying with politicians, who in exchange for financial gifts from assemblers ignore the need of masses. Its very true that the assemblers are profiting at the cost of consumers.
Cyrus Howell
March 19, 2013 3:28 pm
A good commercial venture would be a modern automobile engine rebuilding shop. The consumers could be given credit and make payments on rebuilt engines installed in their cars. . Change the motor oil every 2,000 miles and a quality new car will last to about 180,000 miles.
Cyrus Howell
March 19, 2013 3:35 pm
People are better off buying quality used cars. A new car depreciates quite a bit the first year you own it.
March 19, 2013 5:13 pm
If you can afford it, buy it, otherwise try a bicycle, rickshaw or a tonga or just walk. What's a big deal? Stop whining and do something alternative, only then you will win.
March 19, 2013 5:28 pm
With higher deletion rates (localization) production costs can be decreased. Unfortunately, we have continued to import most of the parts from abroad and hence the dollar effect comes into play. Power costs have also continued to increase which hasn't helped the assemblers in keeping the costs down. If Pakistan wants to play its part in the industrial sector we really need to sort out the power / water crises otherwise, we should just open our imports and focus on other sectors such as BPO, IT and other services.
March 19, 2013 5:46 pm
More cars are not needed in Pakistan. The road infrastructure, parking in the cities, etc. are not up to it. Instead the government must encourage a clean and efficient mass public transportation system in all the big cities. Buying a car should be difficult and expensive so as to discourage ownership.
Manzoor Ahmad
March 19, 2013 6:09 pm
There is only way to bring down the prices and improve quality. Our government has to allow some competition. With high tariffs and allowing three players to monopolize the market, there is no way that our auto-industry will ever be competitive. If tractors are competitive at zero percent import duty and motorcycles can have 90 different assemblers, why not use the same prescription for passenger cars?
Syed Ahmed
March 20, 2013 1:17 am
Have a heart Mr. Editor. You are concerned about automobiles. Are the poor masses? getting two square meals a day, getting clean water to drink, getting required health care, security, getting power, gas and other amenities of life? Can they send their children to schools.
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