The curse of ‘on’ money

Anyone that has ever bought a car in Pakistan knows the struggle of what is colloquially known as the ‘on’ price. This is the extra money that a person has to pay to buy a car and drive it home straight away without months of waiting. 

Why this exists is a long and complicated story. In essence, it is car dealerships that book a large number of vehicles and then prey on the weak supply chain of auto assemblers in the country to hike up prices and make massive profits. It is essentially paying a premium just to have timely delivery. In the past month, even as Toyota, KIA, and others have raised their prices and more cars than ever have entered the market ‘on’ prices have risen. However, with the diversification of Pakistan’s car market and the emergence of new categories like the crossover SUV, will the trend of on prices continue, or is there a change in the offing? 

The state of the industry 

Despite the depreciation of the rupee and persistent inflation in Pakistan, the last few months have seen a marked increase in production and sales of new vehicles. According to the data released by Pakistan Automotive Manufacturers Association (PAMA), during the first eight months of the current fiscal year, the sales of vehicles has increased 57.7%, trucks 82.2%, jeeps / pickups 51.5% and farm tractors 6%.