Carmakers refuse to slash prices despite weaker yen

Dismiss call from engineering board for immediate cut in car prices

ISLAMABAD:

Car manufacturers in the country have turned down the demand for a reduction in vehicle prices despite a decline in the value of Japanese yen.

The reaction came after the Engineering Development Board (EDB) wrote letters to the three auto industry players, calling for an immediate cut in car prices as the yen had gone down in the currency market, a senior government official told The Express Tribune.

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The Japanese yen has lost over 5% of its value since the start of the year against the Pakistani rupee in the open market.

Carmakers said the government was collecting 34% in taxes and their cost of production stood at 33% with a 33% profit. “Therefore, we cannot cut car prices,” he said.

The EDB has taken notice of the increase in car prices and slow delivery of vehicles to earn extra money on customer deposits and has taken the matter to the Competition Commission of Pakistan (CCP).

The official pointed out that the EDB had communicated in separate letters to executives of the three companies that a strong yen had led to increase in car prices in the past, but there had been no price cut following a sharp fall in Japanese currency.

Separately addressing the chief executive of a manufacturer, the EDB said it had received complaints that the company had been involved in slow delivery of vehicles to the customers despite receiving money from them.

According to the complaints, the company took four to five months to deliver cars to its customers, which the EDB termed unjustified and called for immediate action in this regard. It also sent a copy of the letter to the CCP for consideration.

The Ministry of Commerce has already expressed reservations about high prices and poor quality of locally-made cars and attempts by the manufacturers to discourage the import of used cars in the new auto policy.

According to ministry officials, the quality of cars produced in the country was deteriorating with the passage of time. Even the quality of imported used cars was far better and consumers were showing preference for them, they said.

The Federal Board of Revenue (FBR) also argued that the auto industry had got incentives from the government but it did not flourish over the years. On the other hand, consumers were forced to pay high prices.

The government now wants to offer some incentives to new entrants in the auto industry in an effort to spur competition and push down vehicle prices. However, it has failed to unveil the new auto policy after a lapse of over one year.



Officials suggest that Japanese government was putting pressure on Pakistan to announce incentives for the existing industry players in the new auto policy.

The Express Tribune approached a car manufacturer for comments on the EDB’s letter, but it did not respond.

Published in The Express Tribune, February 14^th, 2016.

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