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Out of reach: Automobile costs

March 19, 2013

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spurred by the rush of used cars into the market is likely to prove transitory now that the decision on used cars has been revoked.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.