LAHORE, Nov 18: Premiums being charged on the purchase of new cars in the provincial capital soared further when the market opened on Thursday after Eidul Fitr holidays.

"The premium on new cars is rising because of increased demand and short supply of vehicles in the market," said a car dealer. "We hope that the situation will stabilize in a few days to come."

The rate of premiums being charged from buyers started to rise during the past one-and-a-half month in the run up to Eidul Fitr. In case of some popular brands, premium has almost doubled. It is in spite of the fact that (new) Industries and Production Minister Jehangir Tareen had reassured reporters at his maiden news briefing in Lahore a couple of months back that he would convince the assemblers to "come up with steps to solve the problem" to do away with premium on new cars in not more than three months.

"It's because the demand for cars usually rises in the pre-Eid weeks. Many overseas Pakistanis return home during the holy month of Ramazan to celebrate the festival with their families. They're ready to pay the extra money to get a car for their near and dear ones before leaving the country shortly after Eid. Secondly, many people get new cars leased in the weeks before Eid. These factors have contributed to the further growth in the demand for the cars this year as well. On the other hand, car production is far short of the demand, leading to a sudden surge in the rates of premiums being charged on different cars," said another dealer.

Talking to Dawn, an auto parts vendor also attributed the rise in premium on the ready stock of new cars to the "pre-Eid blitz". "It has to come down to stabilize at the normal levels during the next few days when the demand for cars slows down," he said.

He said the increase in premiums indicated that even reduction in the import duties on cars could not solve the problem. "I would say that the solution to this problem lies in increased production of cars by encouraging more competition among the assemblers. This can be done by attracting more car makers to establish their assembly lines in Pakistan," he said. "Import of cars won't solve the problem. It will only hurt the local industry, especially the vending units."

He was hopeful that the "situation would further ease when the assemblers increase their production early next (calendar) year". "Almost each assembler is expanding its production. The new lines are likely to begin commercial operation in the first half of the next year, easing the situation by bringing down premiums," added he.

At present, according to the dealers, premium being charged on Suzuki Mehran was Rs65,000-70,000, on Cultus Rs105,000-110,000, on Honda City Rs135,000, on Honda Civic Vti Rs150,000, on Honda Vti Oriel Rs185,000, on Corolla XLi Rs140,000-160,000, Corolla 2.0D Rs140,000-185,000, Corolla GLi Rs145,000-165,000, Corolla SE Saloon (MT) Rs85,000-105,000 and Corolla 2.0D Saloon Rs200,000-235,000.