Pakistan’s economy is going through an unprecedented time – and the business sector across the board is feeling the impact. The massive devaluation of Pakistani rupee versus US Dollar in the last two months has resulted in a significant increase in the cost structure of import-dependent industries. The Automotive sector imports its CKD kits, hence the devaluation has hit the industry hard. This has forced major automotive players to consider revising prices upwards.
Prices Increased
Some of the major OEMs have already increased their prices before Eid, except for Proton Pakistan. However, during the last two months, the Pak Rupees has depreciated by more than 20% against the US dollar. Consequently, Proton is the first OEM to come out with its increased revised prices, but by only 11%, which is much less than the actual impact.
This is a welcome step, and we hope that other OEMs who are also expected to increase their prices in the coming week should follow suit by not passing the entire burden of the cost increase to the customers.
Most Affected Segment
The price increase will apply to all vehicle classes, including Hatchbacks, Sedans, and SUVs. The highest impact would be on the crossover SUV category due to its higher value. Korean SUVs may increase their price up to Rs. 7.0 million due to the devaluation of our currency against the US dollar.
This price increase will hit both the consumers and industry hard, which may impact demand, and we can only hope that the economic situation normalizes and stability is restored, which is very important to heal the business sentiment.
Currently, OEMs are not allowed to open LCs to import CKD Kits.
However, this restriction is likely to be lifted after the resumption of the IMF program. Resultingly, if the PKR gains continue against the USD, then prices of automobiles may stabilize.
