The Real Story Behind The Car Price Increase In Pakistan. Car assemblers in Pakistan have begun to give many price shocks in a month, rather than two or three times a year. Surprisingly, according to a recent survey, rupee depreciation versus the dollar is the most convenient justification due to higher production costs. Wouldn’t it be a shocking revelation if these are just ready-made explanations for SAGA’s continuing price increases?
Despite repeated claims of reaching a high rate of localization, the country’s vehicle manufacturers have announced 5 price increases in the first three months of this year. Instead of focusing on localizing high-tech engine parts, stakeholders focused on redesigning bumpers and grilles in the name of new models.
The Real Story Behind The Car Price Increase
The Pakistan Association of Parts and Accessories Manufacturers (PAPAAM) commissioned an investigation into the latest price hike series. The investigation revealed enormous disparities describing the truth of localization and exacerbating automobile prices in the local auto industry.
According to the statistics, car prices have increased by 149% in the last five years, while the rupee has devalued by 71%. Car parts prices have increased by 33% to 112%.
For example, the firm’s presentation indicated that Toyota Corolla Altis 1.6 price climbed by 149% from 2019 to 2023, while the forging components price increased by 91% after keeping unchanged from 2019 to 23.
Localization – a filthy fake fact?
Similarly, Atlas Honda claimed to have achieved 96% localization of their popular bike, the Honda CD-70. That is, 96% of the bike’s parts are made locally. If this is the case, the bike price should not reflect the impact of things such as dollar appreciation and rupee fluctuation – consecutive price increases make no sense. Furthermore, the total episode’s 96% translation is a filthy phony truth. OR, perhaps, they’re just localizing plastic and rubber pieces rather than engine components.
It is worth noting that the CD-70 price increased by 65% between 2019 and 23. However, the cost of several critical bike components, including as forging and rubber parts, increased by 84% and 72%, respectively, from 2019 to 23.
When challenged with the amazing findings, Ali Asghar Jamali simply dismissed the PAPAAM report, saying, “I am shocked and surprised over the misleading data.” Regrettably, suppliers should have double-checked the presentation’s data.”
Meanwhile, a Pakistan Suzuki Executive rejected the story, claiming that it does not appear to be correct. PSMC features a fair price management technique that transforms currency, national and international raw material and other material costs, utilities, overheads, and labor rates evenly. “I’m not sure where or how these isolated studies emerge.” “It is preferable if any party has an issue, they can sit together and resolve it,” he continued.
According to a Pak Suzuki analyst briefing in May 2022, Swift localization had reached 35%, Waggon R 60%, Alto 62%, and Cultus 51%. Bolan and Ravi, both 44 years old, are 72% and 68% localized, respectively.
To add a twist to the story, Irfan Ghani, the CEO of Baluchistan Wheels Limited, stated other figures:
|Suzuki Swift localization||20%|
|Suzuki Alto localization||30% – 35%|
|Suzuki Bolan localization||50%|
|Suzuki Ravi localization||50%|
The Way Forward
According to the paper, the only way forward is localization, in which automakers should produce cheap raw materials locally rather than importing them, resulting in high-priced vehicles. PAAPAM’s consultant presentation encouraged suppliers to encourage assemblers to raise their pricing with the same frequency, timing, and percentage as assemblers do for their own products.
What are your thoughts on the report interpreting the entire localization episode, the truth and dispute? Please share your ideas in the comments section.