The Pakistan automobile sector has been going through a major upheaval for sometime now from which it doesn’t seem to be coming out anytime soon. This sector has been reeling from bad government policies for long, which has now been exacerbated by multiple extrinsic factors. This situation has however only exacerbated recently with the industry insiders predicting a 30% decline in the sales of automobiles in 2022-23.
Who’s the Culprit?
There are many, but let’s take a quick look at a few important ones:
- Soaring car prices – Rupee devaluation and high sea freight rates
- High interest rates – Making owning a car more expensive
- Stricter auto financing policies – Drives down demand
- 1% CVT on cars 1301cc and above – Increases the cost of buying a new car
- Increase in withholding tax for both filers and non-filers – Increases the cost of buying a new car
- Ban on CBUs – Increases the demand of CKDs and drives up their price
- Restriction on import of CKD kits – Disrupts supply-chain, lowers the number of locally manufactured cars, drives up unemployment, among other things
- Petrol prices – Keeps increasing fortnightly
To learn more about how the State Bank of Pakistan is disrupting import of CKD kits, read: Pakistan Automobile Sector Under the Mixed Economic System
No Surprises
Now that you know what’s happening with the automobile industry, you wouldn’t be surprised that Toyota, Suzuki and KIA have stopped taking new bookings for their cars. This could be a precursor for another car price hike as Ali Asghar Jamali, CEO Indus Motor Company has already confirmed that he has no option but to increase the price of Toyota cars after Eid.
It’s Not Us, It’s the CVT
Who would have known owning a car would become more expensive without the price of a car going up?
In the latest federal budget, 1% Capital Value Tax or CVT has been imposed on vehicles of engine capacity 1301 cc and above. What does this mean?
It simply means this:
| Make/Model | CVT |
| KIA Stonic | Rs.44,250 – Rs.47,250 |
| KIA Sportage | Rs.53,000 – Rs.64,990 |
| KIA Sorento | Rs.68,360 – Rs.74,990 |
| Honda City 1.5 | Rs.35,890 – Rs.38,990 |
| Honda BR-V | Rs.42,490 – Rs.42,740 |
| Honda Civic | Rs.55,490 – Rs.66,740 |
Simply put, while the price of Honda Civic RS 1.5L Turbo has not increased, the cost of buying that car went up by Rs.66,740.
But Car Sales Keep Going Up Every Month, No?
If you’re a regular reader of our blog, you would be asking this question. After all, we publish the latest, monthly data from the Pakistan Automotive Manufacturers Association (PAMA) on car sales, both month-on-month and year-on-year. And it has been on the whole, positive. Then why should our readers believe a 30% auto sales drop?
Industry insiders are of the opinion that you will begin to see this slump in September 2022. The positive sales figures that you have seen in the past couple of months is largely due to the pre-budget (advance booking) orders.
While the cost of owning a new car has just gone further up, owning a used car is still within the reach of many. If you are looking for a used car, then begin your search on OLX Pakistan.
Keep us informed with your thoughts on this topic with your comments.
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