Vehicle prices likely to soar

Surge to come on back of rising raw material costs, higher freight charges


Usman Hanif October 14, 2021
PHOTO: FILE

KARACHI:

Industry experts believe that automobile prices might increase on the back of surging raw material costs, higher freight charges and prevailing global shortage of semiconductors.

Speaking to The Express Tribune, AHL auto analyst Arsalan Hanif was of the view that car prices would rise due to devaluation of local currency, higher shipment charges, surge in steel, copper and aluminum costs and worldwide shortage of semiconductors.

The price of electro galvanised steel touched $2,841 per ton in the first quarter of the ongoing fiscal year.

“In addition, cost of cold-rolled coils soared to $2,707 per ton while hot-rolled coils are available at $2,453 per ton,” he said.

He pointed out that automobile companies had suspended the bookings of various car models and firms were in talks with the government to increase vehicle prices.

He feared that sooner or later, the vehicle manufacturers would resort to increase prices.

Echoing his views, Topline Securities analyst Sunny Kumar said that depreciation of rupee against the US dollar will encourage automobile manufacturers to increase car prices.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) former chairman Mashood Ali highlighted that surging raw material costs, since July 2021, have shaken the price structure of all the products being manufactured in the country.

The jump in prices of imported raw material was experienced mainly on the back of the ongoing wave of currency depreciation, he said.

Read Car sales grow 59% in September

“On one hand, freight charges have increased by a manifold while on the other hand, shipments are being delayed due to unavailability of containers,” he stated. “If the exchange rate is not stabilised then the rise in cost of raw material cannot be arrested.”

Ali lamented that increasing raw material costs have disturbed the production capability of the small and medium enterprises (SMEs) and continuation of the trend might spark closure of several small units.

In comments to The Express Tribune, SM Engineering CEO SM Ishtiaq highlighted that local prices of electro galvanised steel have increased by 30%, cost of cold-rolled coils have registered an increase of 31% and rates of hot-rolled coils surged by 34% on a quarter-on-quarter basis.

Increase in demand coupled and rising freight costs have boosted the aluminum price outlook, he said.

The cost of one container has skyrocketed from $500-800 in February 2020 to $9,000 at present which has disrupted the supply chain, he added.

Steel prices have increased by 215% since March 2020, he said.

“The cost of hot-rolled steel hit an all-time high of $1,825 last week,” he highlighted. “Aluminum prices rose to $2,847 per ton and copper touched $9,145 per ton in September 2021.”

Published in The Express Tribune, October 14th, 2021.

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