Analysis,Autos,General News

Gov’t Setting Car Prices: Will It Actually Bring Down Prices?

Gov't Setting Car Prices: Will It Actually Bring Down Prices?

In a rather drastic move, the government is thinking of setting up a price regulatory board to fix car prices. So far, it is the automakers which have largely set the prices of their cars.

The motive behind this sudden move from the government seems to be to take away price fixing powers from automobile manufacturers, drive down car prices and bring relief to the people.  

To this end, the government in the current budget reduced Federal Excise Duty (FED) by:

  • 2.5% on all vehicles up to 3,000cc
  • 100% on all vehicles of 660 cc to 1,000 cc 

Furthermore, General Sales Tax (GST) was slashed by 4.5% on all vehicles up to 1,000 cc. 

Customs duty was also reduced in the hope of driving down automobile prices. Instead, the automobile manufacturers jacked up the prices multiple times,  much to the government’s dismay.

The prices were further increased otherwise in the form of OWN money demanded and received by authorized sales dealers of these automobile manufacturers. 

Big 3 Ruling the Roost in Jan 2021 – Dec 2021

Make ModelPrice Increase in %
Honda Civic 1.8 iVTEC Oriel7
Honda Civic 1.8 iVTEC CVT6.7
Toyota Altis Grande X CVT-i 1.82.5
Toyota Yaris ATIV X CVT 1.53.3
Suzuki Alto VXL AGS4
Suzuki Wagon R VXL AGS7
Suzuki Cultus VXL AGS6.6

On the face of it, the change in prices is minimal but when you look at them in terms of rupees, it is noticeable. For example: 

Make ModelPrice Increase in Rupees
Honda Civic 1.8 iVTEC Oriel280,000
Honda Civic 1.8 iVTEC CVT250,000
Toyota Altis Grande X CVT-i 1.8100,000
Toyota Yaris ATIV X CVT 1.5100,000
Suzuki Alto VXL AGS71,000
Suzuki Wagon R VXL AGS134,000
Suzuki Cultus VXL AGS142,000

This is not to suggest that only these three companies have jacked up the prices of their vehicles. Other companies, too, raised their prices during the year.

Read more: Changan too jacks up prices

Read more: Proton Saga price in Pakistan GOES UP

Read more: MG HS: Huge Price Hike!


To clip their powers, the government has proposed to set up a body called price regulatory board which will consist of representatives from the Ministry of Industries, the Engineering Development Board (EDB) and the auto industry. 

These three will collectively take decisions on car price revision.


EDB, which is the main regulatory body for domestic automakers, has already opposed this idea. While the reason was not given or reported, it can be speculated that the powerful Board which decides which car can be sold in the domestic market and which car is not fit to be sold, does not want to share its powers with the government. 

Obvious Criticism

The government would obviously be blamed for following the Soviet-Communist model where the state determined the prices of goods and services. In a free market economy, governments ideally take a hands off approach when it comes to fixing prices and let the market forces do their job.

The second pressure would be brought on by the powerful auto manufacturing lobby in the country and their foreign patrons – especially Honda, Toyota, Suzuki – the Big Three.

Japan is one of the biggest investors in Pakistan and therefore would exert its pressure to sway the government from setting car prices. 

Is This a Good Idea?

On the face of it, it is. As mentioned earlier, car prices have shot up recently and this happens throughout the year. People who have booked their cars with full payment are asked to pay up extra money to get their cars delivered. This sounds more like extortion than market forces determining prices.

On the other hand, looking at the examples of planned economies, fixing car prices would lead to low ingenuity and improvement over the years. As is, the quality of cars in Pakistan is highly questionable. If you further take away the incentive for improvement from auto makers, you will end up producing lemons. 

So, the government should think twice before going down this slippery slope, where long term benefits are foregone for short term gains. A penny-wise but pound-foolish approach must be avoided. 

Let you know what you make of this? Is this a step-forward in the direction of Naya Pakistan where consumers will not get fleeced in the name of rupee depreciation and supply chain disruption driving up auto parts prices?  

10 responses to “Gov’t Setting Car Prices: Will It Actually Bring Down Prices?”

  1. This is a good move, infact moving forward heavy penalties needs to be imposed on the companies and dealers who are not complying with the government orders in orser to facilitate customers.Moreover, kindly make sure that they maintain quality at same level because all these 3 companies are minting money and I dont onow where it will end and how they will face god.

  2. In this country it can never happen. It’s like increase the price 30% and then to calm down public decrease 3% out of 30%. Yeh salay sab chor hain. Nothing good will happen to this country.
    They just need taxes from people to fed their familes and maintain thair luxuries. That’s all.

  3. This car mafia is so strong in Pakistan, In presence of them it is not possible to set up anything like a regularity board which will determine the prices of cars in the Pakistan. If somehow government manage to set up any regularity board then it will be a great success though considering all ground realities and power of the Mafia it seems impossible.

  4. Yes. This is good but strong work & push up required. In pakistan no quality of cars but price is high & own is also enjoy the dealers & investors.

  5. Hopefully, the prices will reduce. I must say with the price the quality and features of cars can also be maintained by this body. Punishment is a key factor in maintaining quality and code of conduct. Government must rule out the code conduct as well. Else the mafia will purchase them easily.

  6. Yes it is fact long awaiting demand of general public ,this decision should have taken earlier, PLZ TAKE THE DECISION AND BREAK THE MONOPOLY OF LOCAL MANUFACTURERS

  7. It’s good initiative to decrease the cars prices in Pakistan .We should make our own manufacturing and assembling units of cars. We are atomic power but not make a car? So govt and big compinies don’t fool the public of Pakistan and decrese high taxes. I think only in Pakistan there is so expensive cars.

Leave a Reply

Your email address will not be published. Required fields are marked *