Pakistan’s automotive industry is up for a paradigm shift. It has been raining SUVs since Kia-Lucky Motors launched Sportage. This was followed by Hyundai-Nishat’s Tucson, MG ZS and Proton X-70.

The ingress of a slew of compact SUVs into the market bridges the price gap between sedans like Civic, City and Corolla and presents an opportunity for the users of such cars to ameliorate their status. However, the dilemma with this changeover is its appeal to the elite. It portrays a perpetual lack of interest on the part of automobile producers in catering to the relatively less affluent socioeconomic class, which has been forced into using expensive, watered-down vehicles.

In a recent attempt to appeal to this stratum, Kia came up with Picanto, a 1,000cc not-so-affordable hatchback currently priced above Rs1.9 million for basic and Rs2.1m (more than $13,000) for the luxury edition. Consequently, it did not fare well.

Car buyers in Pakistan pay noticeably more than those in the neighbouring countries

Over the years, Pak Suzuki has positioned itself as an affordable brand. The company was able to grab a significant chunk of this market, but its success was premised on shaky grounds. It became a widely opted brand not because of the quality of output it offered but due to a dearth of substitutes. This became evident when users unhesitatingly switched to imported 660cc Japanese cars upon the ease of availability.

Consumers relished fuel efficiency and the comfort of power-steering, power windows and automatic transmission at much lower prices than 1,000cc Suzuki hatchback cars like Cultus and Wagon-R. These Suzuki counterparts did offer some of the luxuries but in premium and high-priced variants. The surge in demand for Japanese vehicles meant that dealers plucked them in heaps into the market.

New entrants like United and Regal have garnered minimal success to disrupt the car industry in their respective attempts so far. United launched its 800cc Bravo in September 2018 with the hope of taking over Suzuki Mehran’s market. In the wake of Bravo’s dismal show, Regal unveiled Prince Pearl last year, but the outing remains unimpressive to this point in time. United Bravo and Prince Pearl are currently priced at Rs1.15m and Rs1.2m, respectively. Recently, United Alpha came onto the scene, being touted as Pakistan’s cheapest 1,000cc car at Rs1.45m.

Even today, the imported Japanese cars are increasingly sought after by the middle-income group. Despite hefty taxes levied on these vehicles as part of the government’s age-old protectionist policies, their price-to-value perceptions remain luminous. A 660cc Japanese vehicle — costing more than Rs1.6m ($10,000) in Pakistan — is preferred over a local 1,000cc car like United Alpha that is available at as low as Rs1.45m ($9,063). This makes one wonder about the enormity of the situation.

In the wake of feeble competition, Pakistani customers pay noticeably more than those in the neighbouring countries. A customer in Pakistan pays just about twice for a Suzuki Cultus than someone in India. The same car worth $11,125 (Rs160 a dollar) for the VXR variant, $12,312 for VXL and $13.312 for the AGS edition costs $6,222 (INR72.84 a dollar) and $6,850 in the case of Maruti-Suzuki’s Celerio and Celerio-X, respectively.

The cost of Suzuki’s Wagon-R is roughly $10,250 while an identical 1,000cc MT Maruti Wagon-R is available to Indian users at $6,390. Lastly, Suzuki’s most extortionate Alto variant costs $10,300 compared to the same car priced at $4,120 in India. It is pertinent to highlight that most of these Indian parallels are newer generation than those available in Pakistan.

The government can no longer afford to hold fraudulent silence on this discourse. The intricacy of this mess demands a stick-and-carrot approach to address this recurring market failure. It is imperative to scrutinise the legitimacy of devaluation-triggered price hikes and incentivise the production of affordable cars if we are to witness the real tabdeeli in this industry.

The writer is a student at IBA, Karachi

Published in Dawn, The Business and Finance Weekly, February 15th, 2021



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