A New Slippage in Rupee value- Will car prices go up again?😢
Last couple of months have not been good for the local car industry. Rupee sank to an all-time new low against the dollar, which in turn nudged the automakers to increase car prices.
And; after Rupee appreciated 16 percent against the dollar, car companies except KIA and Hyundai announced a reduction in their car prices. However, when the Rupee has started slumping again against the dollar, it has lost its value by 3.75 percent since 16 August.
Will car prices go up again?
Industry Analysts have anticipated no immediate appreciation in Rupee’s value. And, if this episode persists, the market may observe a new price hike. It is pertinent to mention that we have already observed four car price-hike series this year.
Reports have disclosed that the local automakers have witnessed a 59 percent month-on-month (MoM) decline in sales. Whilst, new capital value tax (CVT), auto finance restrictions, increased withholding tax on filers and non-filers, price hikes, and high interest rates may drop sales by 30 percent in the fiscal year 2022-23.
Pre-Existing ChallengesÂ
Moreover, the car companies had also suspended the booking and observed production cuts in the face of non-issuance of letters of credits (LCs). State Bank of Pakistan hesitated to issue LCs for CKD kits which in turn suspended local assembly of cars.Â
Ban on car Imports was another issue to add fuel to raging fire of discontent, but the incumbent government has ended the import ban against a record increase in duties. The Federal Board of Revenue (FBR) has increased the regulatory duties (RD) and additional custom duties (ACD) on the import of non-essential and luxury items, including vehicles (CBU).
Increase in RD – A New Price Hike
As per reports, regulatory duties on cars larger than 1000cc have increased to 100 percent, previously 15 percent. Meaning, duties imposed on CBU cars observed a hike of 85 percent. Resultantly, car prices would mark a new high – the local market may witness a new price hike series.
The Federal Board of Revenue has issued SRO1571(I)/2022 under which the increased rate of regulatory duty would be applicable from August 22, 2022 to February 2023.
what do you think, will car prices go up again after Rupee has started depreciating again against Rupee? Drop your thoughts in the comments section