Auto prices cuts unlikely despite cheaper dollar
Amid the rupee strengthening and the government’s intention to bring down the dollar rate to Rs250-260 soon, the country’s auto assemblers appear a bit reluctant to pass on the benefit of the currency appreciation to the consumers.
According to Dawn, when assemblers were contacted about the possibility of a price drop, their answer was “No.”
According to the assemblers, prices rose steeply during the 16-month tenure of the PDM government due to high landed costs of imported parts and accessories as a result of rupee depreciation against the dollar and rising overhead costs such as inflated power and gas bills.
In the case of rising prices of imported parts, the rupee’s appreciation in the interbank market must have brought them down or at least diluted their impact, but consumers have yet to benefit.
In the interbank market, the dollar reached Rs307.10 on September 5, but is currently trading at Rs291.76, meaning that it has lost over Rs15 against the local currency since then.
In the past, assemblers have given instant price shocks to consumers when the rupee declined, even shutting down assembly plants due to letters of credit issues and limited imported parts inventory.
An executive at Indus Motor Company (IMC) said “no” to future price drops for vehicles without mentioning any reasons.
Honda Atlas Cars Ltd (HACL) responded similarly, claiming that the company had not raised prices after the dollar value increased.
Additionally, authorized dealers of locally assembled cars did not mention any price reductions, despite high sales declines compared to last year.
According to a Lucky Motor Corporation Ltd (LMCL) dealer, there has been no price reduction so far. On Sept 6, LMCL, the manufacturer of Kia vehicles, announced an increase in prices of up to Rs350,000.
The assemblers may revise prices downward if the rupee remains stable below 280 and no other cost hits occur, according to an official at LMCL, who asked not to be named.
Volumes put pressure on fixed costs, and many assemblers are offering incentives to increase volumes. If the assemblers import inventory at a higher dollar rate than before, it is either sold or the assemblers import new inventory at a much cheaper rate, reducing average costs so much that the assemblers feel they can pass on price reductions to customers, he said, adding that due to low volumes, increasing energy costs and higher fixed costs per unit are a challenge at the moment.”
In addition to electricity and labour costs, Prince DFSK Sohail Usman said there has been no decrease in prices.