The Pakistan auto industry is in the midst of a serious crisis and those associated with it are really worried, except the investors.
It is such a lucrative trade right now that the sharp minds have pulled their money from other investments and have gone lock, stock, and barrel into buying cars.
The Story Behind: What Is Going On?
If you’ve been keeping up with the ever-increasing car prices in Pakistan, it wouldn’t take you long to realize what’s been going on.
Car prices go up almost every month. If you book a car at price X, by the time you get it delivered, the price has increased by so much. You can then sell your brand new car at a premium rate.
However, a question arises. Why would someone buy a car from you at exorbitant prices when he/she can get it from the dealer?
The answer is, he/she can’t get it from the dealer because the hottest models are hardly ever available on the spot. You’ll have to book them in advance, and then wait for months to get them delivered. So, if you are in a rush, what do you do? You go to the investor, pay him what he’s asking for, and drive away with your prized possession.
Why Do Car Prices Keep Going Up?
Or you can ask, why do these business savvy investors keep investing so heavily in the auto sector? The answer is simply – they know they won’t lose, because prices will keep going up.
So, why do the prices keep going up?
There are a variety of reasons for it, but the fluctuating forex (the US Dollar keeps going up against the Pak Rupee) is the principal reason.
Given the country’s dire economic situation, the government wants to hold onto the Dollars and has therefore restricted the import of CKD parts. This affects car manufacturing, which means fewer new cars available further driving up their price as the demand is still there. Meanwhile, the government has banned the import of CBUs altogether. This, too, makes the CKD cars more expensive. Of course, there are some other reasons like restrictive car financing policies, higher interest rates, etc.
Numbers Don’t Lie
Let’s take a look at what kind of money these investors are making. These are all estimates based on our market research of course, but you’ll get the idea.
KIA Picanto, for example, had an old price of Rs.2.7m. Now, its price is Rs.3.2 million. This has happened in a matter of months. If you want this car instantly, you’ll have to buy it from an investor who may charge you as much as Rs.1 million extra. Your other option is to book the car now, wait for months to get it delivered and in between its price would increase once again and you’ll be asked to pay the differential.
Take Toyota for example. In recent months, it has raised the prices of its cars between Rs.590,000 and Rs.3,012,000. On these, the investors will charge you anywhere from Rs.500,000 to Rs.2,500,000 as ON money or his profit, etc.
The ON money on Honda City is between Rs.100,000 and Rs.150,000 and on Suzuki Alto and Cultus about Rs.500,000.
Patience Is a Virtue
Whoever said this must have the Pakistan auto consumer in his mind. Joke aside, this is the only way to cut out the middleman. Simply book a car and wait for it to get delivered. There is no other way out of it. Successive governments have tried and auto manufacturers have made (false) promises. Nothing has worked. Now, it is up to the buyer to make a difference.
To know more about the latest car prices, visit our New Cars Page.
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