DOWN TREND IN AUTO MARKET SALES
Jul 13 - 19, 1996Assemblers to increase prices further
As a result of the taxes and duties announced in the budget, sales in the car market have been showing a downward trend while the prices of different cars in the market, whether CBU or CKD, are now registering an increase of between nine to fifteen percent.
According to sources in the Indus Motor Company, assemblers of Toyota range of vehicles and the first to announce an increase in their prices after the budget, this increase is due to the six percent increase in the sales tax and the rise in the import duty on the CKD as announced in the budget.
Though an official of the Company said that the new prices will be announced shortly, the new prices have already been applied in the market for those who do not have the patience to stand the ordeal of booking their cars through the company and would rather pick up a car from the showroom of a car dealer for a bit of premium.
Before February 1994, consumers had a choice : whether they wanted to buy an imported second-hand car, available at outlets all over the town right then, or would prefer to go for a brand new car. This parallel market had served as a control to keep in check the local assemblers right since they entered the scene with the introduction of the first car assembly unit in the country in 1983. Suzuki being the only assembler then, with the objective of producing a passenger car that was affordable for the masses, could not price itself beyond the masses had it come to serve.
Then came the tenure of prime minister Nawaz Shariff who allowed the import of more than 77,000 yellow cabs under the tax-free scheme that was introduced then. Though the objective then was said to be the improvement of public transport and the creation of self-employment opportunities among the youth, it was believed that the scheme was widely abused, and that many of the vehicles found their way into open market.
Another scheme allowed import of a vehicle tax-free if a 10% deposit was made with a bank the banks being obliged to finance the rest of the purchase. Therefore the banks took initiative and imported thousands of passenger cars and commercial vehicles which were cancelled as soon as the present government took over, leaving the importers with massive stocks and huge bank debts.
While, on the other hand, the schemes boosted demand, the effect on the local assemblers, on the other hand was very severe which prompted the joint action of the local assemblers and the vendors association. The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) went into consultation with the new government. They argued that the average life of second-hand cars was much shorter and therefore their import should not be allowed as it would adversely affect the local car assembling industry and its allied industries. The government promptly banned the import of second-hand cars initially for a period of one year which was later extended.
This, according to All Pakistan Motor Dealers Association, gave an unprecedented free hand to the local assemblers since they now had no competitors and could increase prices at will.
According to one study, the prices of the locally assembled vehicles in Pakistan were competitive with equivalent models in Europe until recently when, over a period of nine months, the local assemblers increased their prices four times and therefore the prices could not be compared anymore. Pakistani cars were slightly higher in prices while their standard of their interior was slightly lower. For example, cars in Europe would rather use leather for the seat covers than the Rexene which is generally used in Pakistan.
And until the import of second-hand cars was banned in the country, as mentioned earlier, Suzuki car stood as the car of the masses and was selling very well alongside the imported second-hand cars of higher capacity. However, since then the car, which used to cost less than 90,000 rupees, has gone up to 305,000 rupees.
KIA Pride was introduced as an alternative to Suzuki as a common man's car., it started with a very bad reputation in terms of meeting its commitments and therefore evidently failed to deliver the goods. Nevertheless, they too have joined what one consumer described as the "bandwagon of purse snatchers" by arbitrarily increasing the prices of their cars which they have yet to deliver.
Bank loans, or other form of vehicle purchase financing are yet to develop in the country. As one study concluded recently, Citibank Car, the only car financing organisation operating in the country is believed to have provided less than 3,000 car loans to individuals since its inception, though accurate figure could not be obtained from the company. The major difficulty is providing the bank with security, which some termed as a way of keeping the genuine lot of consumers away. Therefore the loans are available only to very high ranking civil servants or senior employees of multi-national companies.
Vehicle leasing, although still in its infancy, is more or less growing faster than the car loans from banks. It is a hire-purchase sort of scheme, whereby the vehicle is hired for a monthly fee, and ownership is transferred only after the requisite number of payments have been made. The purchaser ends up paying more than the market price at the end of the day.
Generally the market that was just picking up after almost one year of 'still market' due to the law and order situation and cases of car snatching, is once again still at the moment as there has been very little activity in the market since the budget was announced.
According to Farooq Danawala of Sealink Automobiles, the corporate purchasing has stopped for a while and uncertainty prevails in the market to the extent that they "could not quote prices over the telephone now," as was the practice in the market.
It was reported recently that prime minister Benazir Bhutto after finding out, during her trip to Japan, that the Japanese versions of Toyota and Suzuki are cheaper in Japan than the Pakistani assembled ones priced in the Pakistani market, is quoted as having agreed with the All Pakistan Motor Dealers Association that she will allow import of second-hand cars for the people of small means who cannot afford to buy expensive cars. On the other hand, there is high resistance from the supporters of the car assemblers among the policy-makers in the capital to allow import of second-hand cars.
And with the rupee falling every other week, there is no remedy in sight for car buyers while the car manufacturers hang their price decision on the rupee-yen parity.
Yousuf Shirazi of Honda Atlas Cars recently expressed the opinion that the only solution to this problem was mass production while, other than KIA and Suzuki, all assemblers in the country today manufactured bigger cars which were not within the reach of the masses. Even Ghandhara which is said to be coming to join them towards the last quarter of this year is said to be coming up with a 1400cc vehicles which would definitely not be within the 'common' bracket.
The prices, according to market sources still indicate an upward trend and have not stopped moving because the assemblers have not officially announced the increase in the prices of their cars. Whatever may be going on in the market at present, prices are being pushed up only by the market trends, they say.
The latest Honda Civic that was priced at 685,000 rupees around this time last year, has now come to cost 810,000 rupees and may go up further after the announcement of the price increase by the assembler. As for Toyota Corolla, the latest model which cost Rs 645,000 about this time last year, is now available in the market for Rs 725,000 with expectations of further rise after the announcement of the new prices by the assemblers.
Likewise, Mitsubishi Pajero 5-Door, 2800cc Diesel intercooler Turbo engine which was available at this time of last year for 2.3 million rupees is now selling in the market for 2.9 million rupees while Suzuki Potohar which was available then for 485,000 rupees is now selling for 520,000 rupees in the market.
Not only have the prices of passenger cars and trucks gone up considerably, the prices of Awami tractors, too are reported to have gone up from Rs 150,000 to Rs 280,000. These tractors were reportedly being imported by the government for distribution among the small farmers through balloting.
PRICE(in Million)W/A STD UsedPassenger CarsAlto (Mehran) 96 .305 .275 .245Suzuki Khyber 96 .405 .355 .300Suzuki Margalla (1300cc) 96 .505 .455 .425Suzuki Margalla (GLX) 96 .565 -- .500Toyota Corolla XE 96 .665 __ .575Toyota Corolla GL 96 .725 __ .650Toyota Corolla GLi 96 .810 __ .725Toyota Corolla 2.0cc Diesel 96 .739 __ __Mitsubishi Lancer EL 94 .6 __ .5Mitsubishi Lancer Super Salon 96 .9 __ .7Mitsubishi Gallant (manual) 96 1.9 __ 1.7Mitsubishi Gallant (Auto) 96 2.0 __ 1.7Nissan Sunny (Japan CBU) 93 .55 .5 .425Honda Civic Ex (Pak) 96 .81 __ .75Honda Civic Lxi (AC) 96 .698 -- --Honda Civic Exi (Manual) 96 .779 __ __Honda Civic Exi (Auto) 96 .854 __ __Honda Civic VTI 96 .889 __ __Honda Accord 1800cc 96 2.3 __ 2.0Honda Accord 2000cc 94 2.3 __ 2.0KIA Pride 1100cc 96 .345 __ __KIA Ceres 96 __ .425 __Daihatsu Charade (recond.) 86 .275 __ .25Daihatsu Cuore 800cc 93 .340 __ .300BMW 316i 96 2.6 __ 2.0BMW 318i 96 2.7 __ __Mercedes Benz E220 95 6.0 __ 4.5Mercedes Benz S320L 94 9.0 __ __JeepToyota Land cruiser (M)4.2cc 95 4.0 __ 3.5Toyota Landcruiser Au)4.2cc 95 4.2 __ 3.5Mitsubishi Pajero 5Door 96 2.9 __ 2.5KIA Sportage 4x4 96 1.4 __ 1.1Cherokee Limited 4.0cc 96 2.52 __ __Cherokee Grand 4.0cc 96 3.5 __ __Suzuki Potohar 96 .52 .47 .40VanToyota HI-Ace Commuter STD 96 __ 1.2 ___Nissan 15 Seater Van DAC 93 .725 .625 .6Nissan Civilian Mini 26 Seater 93 1.0 __ .8Suzuki Bolan 96 ___ .310 .275Mazda Van STD Model 93 .7 __ .5Pick UpSuzuki Ravi 96 ___ .265 .200Toyota HI-Lux(4x2) S/Cabin 96 .725 .6 __Toyota Hi-Lux(4x2)D/Cabin 96 __ __ .675Toyota Hi-Lux (4x4) S/Cabin 96 .935 -- --Toyota Hi-Lux(4x4) D/Cabin 96 1.6 __ 1.3Nissan 4x2 pick up 95 __ .55 __Mazda Pick up 4x2 S/Cabin 96 __ .7 .55Mazda pick up 4x2 D/Cabin 96 __ .825 .7Mazda Chasis with cabin 96 __ .64 ___Mazda Chassis without cabin 96 __ .67