Pandemic-led Supply chain issues still prevail around the globe, but in Pakistan, things are deliberately manipulated to earn some extra amount. A report by the Pakistan Institute of Development Economics (PIDE) has revealed some shocking revelations – heralding an important twist in the game.
Interestingly, car companies have so far been clamoring that import restrictions inflicted by SBP is the only problem causing supply issues and then ongoing production cuts. Automakers reported it as a real mess, and it is so. On other hand, the report has disclosed the whole story translating how the car makers have maintained the monopoly in the market – supplying less cars than the market demands.
False Car Shortage
As per the report, “car assemblers have a capacity of 400,000 units but produce only 200,000 a year, ensuring a shortage prevails in the market.” This is how monopolists supply less than market demand in a way to keep a low supply of vehicles. The reason behind the sin is “ON Money” – a black-market premium collected by the car makers, dealers, and inside traders.
And, this is not the first report unveiling this story. Earlier, the Public Accounts Committee reported the same. Concerning “ON money” and late deliveries, committee members, purported that dilly-delaying is just a tactic to earn more in the name of “ON”.
Ban on Used Cars Promotes the “ON Money Culture”
When used (Japanese) cars are banned from importing, the local assemblers get a chance to play their game. Instead of expanding local production of cars, car manufacturers expand the bookings and collect excess orders to earn a maximum amount of On Money. In turn, consumers get nothing, no availability date, and no price guarantee.
This is the reason that we have not to upscale the localization of cars. Even after 50 years, we have not produced even a single car competing with a used car in terms of features and quality. Still, the industry is an infant and will remain the same until the policies are designed for the industry’s development rather than those in charge.
