KARACHI: Amid the rupee strengthening and the government’s intention to bring down the dollar rate to Rs250-260 soon, the country’s auto assemblers appear a bit reluctant to pass on the benefit of the currency appreciation to the consumers.

When Dawn contacted assemblers to take their viewpoint regarding any chance of price drop in locally assembled vehicles, their quick answer was “No.”

Consumers witnessed a steep rise in prices in the 16-month tenure of the PDM government which according to the assemblers was because of higher landed cost of imported parts and accessories due to rupee depreciation against the dollar coupled with rising overhead charges like inflated power and gas bills.

However, the rupee’s appreciation in the interbank must have brought down the price of imported parts or at least diluted the impact in case of the rising price of imported parts but consumers have yet to see any benefit.

On Sept 5, the dollar swelled to Rs307.10 in the interbank while it is currently trading at Rs291.76, which means the greenback, after hitting the peak, has lost over Rs15 against the local currency.

Assemblers have previously given instant price shocks to consumers on account of the rupee decline even keeping assembly plants shut due to issues in opening letters of credit and a thin inventory of imported parts.

On prospects of future price drop in vehicles, a senior executive in Indus Motor Company (IMC) said “no” without mentioning any reasons as to why prices cannot come down.

A similar reply came from an official of Honda Atlas Cars Ltd (HACL) but he claimed that the company had not pushed up the prices after the increase in dollar value.

Authorised dealers of locally assembled cars also did not hint at any price fall in a tough business environment when sales are highly depressed compared to last year.

A dealer of Lucky Motor Corporation Ltd (LMCL) said “No price cut so far.” LMCL, the assembler of Kia vehicles, on Sept 6 increased the prices by up to Rs350,000.

An official in LMCL, who asked not to be named, said if the rupee stays stable below 280 and no other cost hits, the assemblers may think of revising prices downward.

With volumes, there is pressure on fixed costs and many assemblers are spending money on customer incentives to increase volumes. “An important factor is that if the assemblers have inventory imports at a higher dollar rate than before it is either sold or new inventory of much cheaper rate reduces average cost so much that the assemblers feel it can pass on price reduction, he said, adding for now increasing energy cost and higher fixed cost per unit due to low volumes is a challenge.”

Director Prince DFSK Sohail Usman said there is no price decrease as electricity, labour and other costs have increased sharply.

Motorcycles

A senior market leader at Akbar Road, the hub of used and new bikes, Mohammad Sabir Sheikh said there are no apparent signs of any price cut in bikes as assemblers had brought imported parts and kits when one dollar was trading at a record high.

After the crackdown in the current month and in case the downward trajectory in dollar rates continues, then the assemblers should pass on its benefit either by the end of October or early November by cutting Rs8,000-9,000 in 70cc prices, Rs15,000 in 125cc and Rs25,000 in 150cc.

He said new LCs are being opened at lower rates and taxes would also be charged keeping in view the greenback value. Mr Sabir said the assemblers need to reduce prices to lure buyers to bolster sales.

Published in Dawn, September 24rd, 2023

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