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DAWN.COM | Business | Rising yen to impact car prices
LAHORE: Car makers may increase their prices to cover the rising costs of imported CKD kits on account of an appreciating yen against the rupee.
“The car prices may be raised by up to Rs50,000 a unit to offset the impact of a rising yen and protect our margins,” a director of one of the country’s three Japanese car assemblers told Dawn on Monday.
The yen has gained almost 10 per cent against the rupee to rise to Rs1.0037 in three months and 46 per cent in two years making imports from Japan dearer.
“The imported CKD kits are almost 35 per cent of the total cost of a car. So you can imagine the impact of the 10 per cent increase in the import costs on our prices and margins,” the executive said.
He further said the taxes on imports had also increased in line with the rise in the import costs of the kits.
Another car assembler contended that the raw materials of the auto industry had also spiked steeply in the past few months putting immense pressure on auto makers worldwide.
The price of steel sheet has gone up to $1,050 per ton from $701 at the beginning of 2010. Similarly, the price of aluminium primary ingot has increased from $68 per pound to $108.
On the other hand, however, the government is bringing pressure on the car assemblers to cut their prices to make them affordable for more people.
In order to build more pressure on the car makers, the government is believed to be considering a proposal to relax restrictions on the import of used cars under the transfer of residence (T/R) scheme.
“We are in a fix because the government wants us to reduce our car prices at a time when imports are becoming costlier, prices of raw materials are going up and our capacity utilisation is down to 55 per cent,” the assembler lamented.
The industry sources claim that the government has, in recent times, put pressure on the car makers by giving additional concessions to new entrants in violation of the Auto Industry Development Policy formulated with the consent of all the stakeholders.
According to a proposal by the federal industries ministry, the government could double the rate of depreciation per month to two per cent on import of used cars. Apart from that, it is also considering to allow import of up to five-year old cars instead of three years.
“The government is fully aware of the fact that the economic slowdown and high inflation have resulted in an increase in prices of every commodity and product, including the prices of the imported used cars.
But the car prices have not been increased in line with their rising costs. In fact, the prices of some brands have declined,” he claimed.
It may be noted that Suzuki operated on less that 50 per cent of its installed capacity of 150,000 units during the last financial year, while Honda with a capacity of 40,000 units could roll out only 13,500 units.
Dewan worked at only 12.18 per cent of its 10,000 cars’ capacity. Only Indus Motor could utilise above 77 per cent of its installed capacity of 65,000 units.