Despite the lower dollar, price drops for cars are doubtful. 

Will they fall once the Pakistani rupee appreciates? 

KARACHI:

The country's auto assemblers seem a little hesitant to pass on the benefit of the currency appreciation to the consumers, despite the rupee strengthening and the government's plan to lower the dollar rate to Rs250-260 soon.

Auto manufacturers are reluctant to pass the benefits on to customers despite a rise in the rupee's value and a further decline in the value of the dollar.

Consumers haven't yet benefited, despite a boost in the rupee's interbank rate. The report claims that vehicle manufacturers raised prices on consumers immediately as a result of the rupee's depreciation, which led to the closure of manufacturing facilities due to problems with LCs and a lack of imported parts.

Consumers saw a large increase in car prices during the past 16 months as a result of the rupee's decline in value against the dollar, which led to higher expenses for imported components and high power and petrol prices.When Dawn approached assemblers to get their opinion on the possibility of a price cut for locally built automobiles, their immediate response was "No."

Consumers noticed a significant increase in prices during the 16-month PDM administration, which the assemblers claim was caused by higher landed costs of imported parts and accessories due to the rupee's depreciation against the dollar, as well as rising overhead costs like higher gas and electricity prices.

Although customers have not yet noticed any advantages, the rupee's rise in the interbank market must have reduced or at least lessened the impact of the rising price of imported parts.

The dollar peaked on September 5 at Rs307.10 in the interbank market, and it is currently trading at Rs291.76, meaning that it has lost more than Rs15 against the local currency since its peak.

Assemblers have in the past shocked consumers with sudden price increases as a result of the rupee's collapse, even closing assembly lines due to difficulties securing letters of credit and a low supply of imported parts.

Unable to provide any justifications, a top executive from Indus Motor Company (IMC) responded "no" when asked about the likelihood of future vehicle price drops.

A representative of Honda Atlas Cars Ltd (HACL) provided a similar response, although he insisted that the company had not raised pricing in response to the rise in the value of the dollar.

Authorised dealers of locally produced cars likewise refrained from mentioning any price reductions in the face of a challenging economic climate and sharply declining sales compared to the previous year.

"No price cut so far," a Lucky Motor Corporation Ltd. (LMCL) dealer stated. On September 6, LMCL, the company that assembles Kia automobiles, raised the pricing by up to Rs350,000.

According to an LMCL official who declined to be identified, the assemblers may consider lowering prices if the rupee remains stable below 280 and there are no more cost increases.

Assemblers are spending money on customer incentives to raise volumes since volume puts pressure on fixed costs. He added that for the time being, rising energy costs and higher fixed costs per unit due to low volumes are a challenge. "An important factor is that if the assemblers have inventory imports at a higher dollar rate than before it is either sold or new inventory of much cheaper rate reduces average cost to the point that the assemblers feel it can pass on price reduction," he said.

Electricity, labour, and other expenditures have climbed significantly, according to director Prince DFSK Sohail Usman, hence there has been no price cut.

Motorcycles

Assemblers had imported parts and kits when the value of a dollar was at an all-time high, according to Mohammad Sabir Sheikh, a senior market leader at Akbar Road, the centre for new and used bikes.

After the present crackdown and in the event that the downward trend in dollar rates persists, the assemblers should pass on the gain by lowering the costs of 70cc models by Rs8,000–9,000, 125cc models by Rs15,000, and 150cc models by Rs25,000 by the end of October or the beginning of November.

According to him, new LCs are being launched at cheaper rates, and taxes will also be assessed while bearing in mind the value of the US dollar. According to Mr. Sabir, the assemblers must lower their prices to entice customers and increase sales.

It's interesting to note that some businesses raised their prices by hundreds of thousands of rupees in response to the increase in the value of the dollar, but so far, there hasn't been a price decrease in response to the rise in the value of the rupee.

One official suggested that they would think about lowering automobile pricing if the rupee stays stable below 280 and other factors don't result in higher costs. A representative from another company, meanwhile, claimed that there hasn't been a price decrease because costs like labour, power, and other expenses have increased quickly.