LAHORE: The National Assembly Standing Committee on Industries and Production on Thursday directed the Ministry of Industry and Production (MoIP) to take strict measures to stop the monopoly of manufacturing companies and middlemen to eliminate on-payment in order to ensure the timely availability of vehicles at controlled prices.
During a meeting held here in Punjab’s provincial capital, the committee also expressed concern over the price hike of vehicles despite the fact that the USD had decreased in value against the PKR during the past few days.
Many automotive companies revised their prices downwards when the USD was trading for 215 against the PKR. The PKR has since depreciated, however, the degree to which revisions occurred is still a topic of debate between manufacturers and customers.
Profit has documented various instances of how automotive manufacturers have made downward revisions as the value of USD changed against the PKR. Further downward revision cannot be ruled out if the PKR continuously gains against the USD, particularly given the sales figures automotive manufacturers posted in July.
It is pertinent to note that there is a lag between the price revisions by manufacturers and the PKR’s fluctuation due to the productive models in place across the industry. These models are centered on the near to mid term horizons as manufacturers seek to place their orders for their completely-knocked-down (CKD) kits according to what they speculate will be the PKRs value. These models are very conducive to upward price revisions as manufacturers seek to hedge against depreciation, and downward revisions as seen in the cases of KIA Motors and Hyundai Pakistan.
The committee is correct to take note of on-premiums as they have spiked over the summer. However, enacting more stringent methods may not yield the results that they desire. The premium exists because car dealerships book large numbers of vehicles and prey on the weak supply chain of auto assemblers in the country to hike up prices and make massive profits. Subsequently on-premiums exist currently because the supply chains of most automotive manufacturers are in shambles because of the State Bank of Pakistan’s (SBP) increased administrative oversight on CKD kits.
It is likely that had the measure not come into existence then the SBP’s reduction in the duration for auto-financing alone would have led to enough demand destruction for automotive companies to not have large queues.
