Business

Dominant players: CCP initiates inquiry into price increase

Auto assemblers come under scanner of anti-trust watchdog.

Our Correspondent June 26, 2015

The inquiry has been initiated for putting unreasonable financial burden on the consumers of passenger vehicles without giving them value for money. PHOTO: REUTERS

ISLAMABAD: The country’s two largest car assemblers will face an inquiry for an apparently unreasonable hike in prices of their vehicles without justifying the raise with an upgrade of technology.

The Competition Commission of Pakistan (CCP) on Thursday announced that it has initiated an inquiry under Competition Act, 2010 into the possible anti-competitive behaviour of the two dominant car assemblers in the automobile sector. The inquiry has been initiated for putting unreasonable financial burden on the consumers of passenger vehicles without giving them value for money, according to a handout issued by the CCP.

There has been growing calls to regulate the automobile sector amid reports that the government is considering introducing a European brand in the next two years to break their monopoly.

The CCP started the inquiry after receiving various complaints and concerns highlighting the issues of high prices of Toyota and Suzuki vehicles, hefty advance payments, delay in delivery of passenger vehicles, charging of premiums for on-the-spot delivery and no facility to recall the vehicles.

The inquiry will initially cover the market for consumer vehicles ranging between the engine capacity of 800cc to 1,299cc in which Indus Motor Company Limited and Pak Suzuki Motor Company Limited are the dominant players, said the anti-trust watchdog.

One of the major concerns shared with CCP is the consistent upward trend in the prices of cars without upgrade in technology, it added.

Although prices of locally-assembled cars have increased manifold over the past years, the manufacturers have failed to take significant measures to upgrade the engines and add safety and other features corresponding with the increase in prices, the CCP observed.

Similarly, one of the gravest predicaments faced by the consumers of new cars is the requirement of hefty advance payments for placing the order to book a car.

The delay in delivery of vehicles is another burning issue. Despite having ample capacity, the delay is questionable particularly in the case of those models that have not undergone considerable changes and whose demand forecast can be made with relative certainty, said the CCP.

Published in The Express Tribune, June 26^th, 2015.

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COMMENTS (7)

M M Malik | 8 years ago | Reply The Japanese auto business are silent on the un-ethical business practices of the local collaborators and corrupt bureaucracy.

Aneela | 8 years ago | Reply @ Asad Rizvi you made an amazing analysis and covered each and every part of this dirty friendly govrt policy for businesses. Thumbs up to you

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Atif | 8 years ago | Reply PakSuzuki is manufacturing obsolete vehicles not sold is any other country outside Pakistan, the country's biggest automaker is dumping obsolete technology. Japanese are taking full advantage of government incompetence and not transferring technology to the country and not including safety features which are critical for passenger lives. Local auto companies should be forced to use safety features such as airbags which are standard/mandatory in all other countries. No more exploitation from Japanese auto industry. Local auto industry is even against entry of new assemblers and lobbies with government to make entry of new players in the market difficult.

Avais | 8 years ago | Reply Much required investigation. Toyota and suzuki are ripping people off since ages. I pray that they are found guilty , fined heavily and then their practices are improved.

asad rizvi | 8 years ago | Reply The most unfortunate part of our nations misery is inequality, which is backed by so called business friendly approach in shape to subsidy and rebates that neither contributes for the economic well being of the people nor government is able to generate substantial revenue to plug holes resulting piling of huge debt (Rs 18.65 Trillion). To give example our leaders frequently talk of rising food and energy prices or commodity prices, but honestly this subject is good enough for only TV talk shows and seminars only. Since most of them are lawmakers and or related/connected to each other, their immediate priority is to support and protect each others business. Wheat, Rice, Iron and Ore, Oil Coal etc is cheaper in international. In last 2-3 years, prices have fallen by nearly 30-50 pct, but in our country food prices is artificially inflated in the name of support price. Either rebate is given when prices fall or high import duty is applied to counter cheap buying from international market. Similarly, Car industry is no different, as it is distant away from deletion policy. Pakistani market still limits itself in providing batteries, lightnings and tyres, steel sheets, wheel rims, rubber and plastic material, which is below 50 pct, as major component such as all engine related and transmission stuffs are imported. The big catch over here is the exchange rate comparison between Pak Rupee versus Japanese Yen because cars in Pakistan are of Japan make. The reality is that on June 30, 2012 in the Inter-Bank Market, Pak Rupee parity was 94.50, where as Japanese Yen was 79 per one USD. Today Pak Rupee is at 101.82. Whereas, One-USD fetches 123.40 Yen. So since June 210 Pak Rupee depreciated by 7.7 pct and during same period Yen depreciated by 56.7 pct. This means during this period Yen was continuously weakening against Pak Rupee, whereas car producers kept on raising prices without as there was no check on car price hike. In comparison to Yen/Rupee parity, Yen has has so far weakened by nearly 49 pct. Hence buyers have no choice, but to pay in excess, because of friendlier government approach towards business community, while car industry continues to mint easy money like all other businesses in Pakistan, as long as they are blessed with friendly government policy.

Aneela | 8 years ago | Reply Thanks God somebody took the initiative about this long awaited issue. My suggestion is that local production should be banned and import duty should be reduced so that people will get the better car in less price, or strict the local player to play their game with loyalty towards people not profitability.

sparrow | 8 years ago | Reply Much Needed Investigation

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