Buyers seek price relief as dollar weakens

KARACHI: As the rupee strengthened against the dollar, potential auto buyers are wondering about a downward revision in car and motorbike prices at local dealerships. However, players in the automotive sector do not anticipate an immediate price drop.

Speaking to Dawn, commodity traders also reiterated the same expectations from struggling consumers seeking price relief amid rising inflation.

Despite claims of improved location, prices of cars, jeeps and SUVs have risen by more than Rs 300,000 over the past month, depending on engine power, while prices of motorbikes have risen from 5,000 to 25,000 rupees during the same period.

“Customers are expecting vehicle price revisions and they’ve been asking about it since the rupee started appreciating against the greenback,” a Japanese car dealer told Dawn.

Auto sector, commodity traders say consumers anticipate rate cut

He said it appeared many buyers had delayed plans to buy cars in anticipation of a lower price revision by assemblers.

Another Japanese car dealer said people were looking for a price cut. “We don’t have answers for them.”

Speaking to Dawn, Pakistan Motorcycle Assemblers Association (APMA) Chairman Mohammad Sabir Sheikh said: “Consumers are now arguing with dealers over why bike prices are not coming down after the appreciation of the rupee.”

He said assemblers are in a tough spot as they imported raw materials after opening LCs at higher rates.

Mr. Sabir said one dollar is now selling at Rs226 in the interbank market after hitting around Rs240.

If a dollar came to Rs200, it would incentivize bike assemblers to lower their prices.

A Korean vehicle assembler said: “Let the rupiah calm down a bit. Many uncertainties loom on the economic and political fronts. Auto assemblers will revise prices once things calm down.

A Chinese vehicle assembler believed that the price increase by car assemblers was based on one dollar equaling 235 rupees.

“We need to see the exchange rate in the next two weeks to decide future vehicle price indicators,” he said.

Some Japanese auto assemblers did not respond to pricing questions amid a strengthening rupee.

Assembly lines in the automotive industry have come under severe pressure, however, after strict restrictions imposed by the State Bank of Pakistan (SBP) on clearing completely knocked down (CKD) kits. After repeated requests, the SBP began issuing limited quotas for assemblers to import CKD units.

However, the central bank’s decision forced the Indus Motor Company (IMC) to observe non-production days (NPD) from August 1 to 13 on a parts shortage issue.

Pak Suzuki Motor Company Limited also hinted that it would do the same in case the parts shortage intensifies. Some assemblers continue their operations because they still have old stocks of parts and accessories.

Karachi Wholesalers Grocers Association (KWGA) Chairman Anis Majeed says commercial banks have ruined the import trade by withdrawing import documents at Rs245-266 per dollar instead of Rs239-240 in a unregulated environment.

He said no regulatory authority came to the rescue of the importers as the banks were earning a colossal sum on foreign exchange transactions.

As a result, the difference between the interbank price and the bank’s negotiated price had crossed five to seven rupees to the dollar.

Majeed said the business community faced cost uncertainty, especially for goods that importers brought in on 90 to 120-day credit.

“Under the given circumstances, any price relief for people on imported produce seems a remote possibility,” the KWGA chairman said while analyzing the impact of Rs20 per kg on imported produce when a dollar hit Rs240 against Rs195-200 on the interbank market. .

He said a possibility of lower prices had arisen after the rupiah’s value soared, but commercial banks had taken their toll on importers by charging extra fees on withdrawal of import documents .

“Any price relief would depend on the future stability of exchange rates and world market rates. The business community has lost confidence in the current government which has failed to manage economic and trade issues,” he added.

Posted in Dawn, August 7, 2022

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