LAHORE, May 10: Automobile assemblers on Saturday discounted the public hopes of a major cut in car prices, asserting that it was not possible in the existing circumstances.
“We (the assemblers) are working out the details and will soon provide our calculations to the government,” a senior executive of a car assembling facility, who asked not to be named, told Dawn.
“However, I can safely say on behalf of the industry that the reduction in the prices is going to be between Rs2,000 and Rs8,000 for different cars. After all, we’ll actually be cutting down on our slender profit margins because the factors determining the price of a car are not in our control,” he added.
In their meeting with Federal Minister for Industries & Production Liaquat Jatoi last month, car assemblers had agreed to give a scheme to cut down their prices by June 1, engendering hopes of a massive cut in the prices.
Another source in the industry claimed that the average profit of automobile companies was around 6-7 per cent. “All automobile companies are listed on stock exchange. You can easily verify the size of their profits. Some 3-4 years ago, the margins were as low as 3-4 per cent. But the recent surge in the sales as a result of various factors did improve our profits,” he said.
Car production and sales are said to have gone up by 50 per cent and 43 per cent respectively during the first three quarters of this fiscal year. Total production, according to the industry sources, is estimated between 65,000 and 70,000 units by the end of the last fiscal year on June 30.
He said it was incorrect to presume that appreciation of the rupee against the dollar was “sufficient for the car makers to slash their prices”.
“In the last 10 years or so, the cost of a dollar has doubled. But car prices have gone up only by 35-40 per cent during the same period despite heavy value addition as well as growth in the cost of materials. So why should we reduce the price now?,” he asked? “Besides, our imports come from Japan and the rate of the Yen has remained almost unchanged.”
The industry believes that the government must bring down the rate of tax on the industry if it actually wants to provide relief to consumers, he said adding that the direct tax component is said to be 40 per cent of the total retail price of a car.
It is also alleged that the government was putting pressure on the industry to cut prices as “someone, somewhere is lobbying for permission to import cars by discrediting the assemblers to make quick bucks. “If import of cars is allowed, we would also go into trading,” warned a senior executive.
“It’s very strange that the government, which claims to be the proponent of free market economy, is pressurizing the auto industry to lower the price. It wouldn’t send a positive signal to foreign investors whom the government desperately wants to lure.”