Durability influences car resales
At present, three carmakers share the market of Pakistan – Honda, Suzuki and Toyota, all Japanese brands – producing different models in different categories.
Since there are various categories of vehicles, it is difficult to pick one company or car model that enjoys the highest resale value. Carmakers agree that the most important feature in the resale of car is its durability.
However, apart from durability, the resale value is also influenced by the brand, model, category and most importantly the condition.
According to automobile industry analysts, the best car for resale is the one that retains the largest part of its original price after three to five years of purchase. In the US, one of the most competitive car markets in the world, car prices drop 40-60% in first five years of running.
Indus Motor Company (IMC) – the makers of Toyota Corolla in Pakistan – says the high resale value of a car depends on quality and durability in local conditions.
“It’s 100% true as far as the resale value of a car is concerned,” IMC says in response to an email query on the role of after-sales service in resale. “But the customer’s decision depends on the design, usage, price, specifications, etc.”
Speaking on which things have the most impact on the resale value of a car, an official of Honda Pakistan says it is the quality of car that impacts the customer’s decision and quality of after-sales service of the company comes next.
For a new car, Honda gives warranty for three years and up to 75,000 kilometres of running. “A customer can have complete peace of mind for the first three years. If you buy our car for Rs2 million, after three years its value will not be less than Rs1.8 million, that is not a bad choice,” he says.
These days, local carmakers are also facing stiff competition from imported used cars, which give more choice to the customers.
In 1,300cc engine capacity or above categories, Toyota Corolla enjoys over 70% market share among new cars. The remaining market is divided between Honda Civic and Honda City, Suzuki Swift and Suzuki Liana.
“It should not come as a surprise, if you notice more Corollas on roads. IMC takes great pride in saying that Pakistan is a Corolla-loving nation,” says the company in its annual report.
After a long wait, Suzuki is also getting good response in the 1,300cc category with its Swift model. Earlier, two of its models – Baleno and Liana – in the category failed to stir the market.
Though IMC is taking the lead in big cars with its flagship Corolla model, Pak Suzuki is the leader in the economy car segment – it is in fact the only carmaker producing 800cc and 1,000cc cars in the country these days.
Pak Suzuki produces Mehran – the second largest selling car in Pakistan after Corolla. The third largest selling car is Suzuki Cultus, having engine capacity of 1,000cc.
After IMC discontinued production of 800cc Daihatsu Cuore some months ago, Pak Suzuki is the only player left in the economy car segment because Honda is not in this market.
Car dealers in Karachi are of the view that Suzuki is the bestselling brand in the used car market because most of the selling and purchasing is seen in the economy car segment. Like the new car market, Corolla dominates the resale market in 1,300cc or above categories.
In the new car market too, vehicles of 800cc and 1,000cc accounted for 56% of sales in last fiscal year 2011-12. Overall, about 157,000 new cars were sold in the country last year.
Leading car dealers say Honda has its lovers as well. They say the company may have low production compared to its competitors, but its users never complain about quality.
An official of Pak Suzuki says Suzuki makes up over 65% of the used car sales. Apart from that, Suzuki also enjoys around 50% share in the new car market.
Pak Suzuki asserts that Suzuki are ‘ready to cash cars’ because of their high demand in the resale market.
A car dealer stresses that smaller cars are easily sold, which is the main reason why many people say Suzuki has an edge over other companies in the resale market. Many buyers base their choice on not necessarily what is the best car out there, but the most practical car out there.
Published in The Express Tribune, October 16th, 2012.
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Suzuki Swift were made in manesar plant in gurgaon,haryana and is exported to pakistan and other countries.
The resale value also depends upon the purchasing power of the consumers and their willingness to replace the old car with the new car. The interest rates in Japan are very low so the customers are encouraged to purchase new cars through different banking schemes. In Japan ,the law prohibit the use of new car beyond six years on average causing it to loose the resale value completely on the expiry of six years. It has been rightfully omitted as these banking schemes and laws affect the resale value of the vehicles of all brands in one direction.
Its pathetic how the three major manufacturers in Pakistan continue to be protected selling low quality build cars at ridiculous prices. This sort of protectionism doesnt help the industry but more lazy while enjoying huge margins. The whole point of it should be to build locally assembled cars that can compete with foreign assembled ones but till the local industry doesn't face competition from the foreign manufacturers this wont happen.
We pay the equivalent of a BMW or a Mercedes for toyota corrollas and civics and i really dont have to point out the differences between these cars. Give the local manufacturers a deadline to shape up or ship out till you finally open the doors to foreign manufacturers and i promise you the quality and build of the cars we get in the market will imporve drastically while the prices will do down.
Resale value has nothing to do with quality. It has everything to do with the public perceptions. If resale value was based on quality the resale price of Liana wouldn't be so low. If quality was so important imported JDM cars wouldn't have a lower resale price than the junk that is assembled locally.
As soon as Pakistanis have more options, we will see how much loved Corolla will be.