Dollar Rate is Same as June 2019 But Car Prices Are Not, WHY?

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The dollar rate against the Pakistani rupee is decreasing continuously for the last couple of months. Even the rate has reached Rs152 +/- which was in June 2019. So, it means that the dollar price is the same as it was two years ago. However, very interestingly, the car prices are not the same.

Back in June 2019, when dollar price started to rise, the major car manufacturers, including Honda, Toyota, and Suzuki, began to increase the car prices, citing an increase in dollar rate. It is pertinent to mention that the dollar rate started to rise after June 15, 2019, and the car manufacturers increased the prices on June 15, 18, 21, and 28. 

However, there are no signs that companies are planning to decrease the prices of their vehicles, although the price of the dollar is being reduced since August 2020. Interesting, isn’t it?

Car Prices and Dollar Rate: 

There are two parts of car prices and dollar rate, one is from June 2019 to August 2020, when both dollar rate and car prices went up continuously, while in the second part from August 2020 to April 2021, dollar rate started to come down, while car prices still continue to go up.

To prove the point, we are giving examples of Big 3.

Honda (June 2019-August 2020) 

First, let us discuss Honda Atlas and its car prices from June 2019 to August 2020. In June 2019, the price of City 1.3L AT was Rs23.19 lacs, while one US dollar rate was Rs156.78. The current price of this car is Rs26.39 lacs, while the dollar stands at Rs167.88. This comparison shows that Honda has hiked the price by 13.80%, while the dollar’s rate increased by only 7.08%.

Moreover, the price of City 1.5L AT is hiked by 13.45%, while City 1.5L Aspire AT has seen a jump of 11.94%, and rate of City 1.3L MTis increased by 12.39%.

The same is the case with City 1.5L MT and City 1.5L Aspire MT, which have seen a hike by 12.95% and 12.74%, respectively.

Suzuki (June 2019-August 2020)

Now let us discuss Pak Suzuki. In August 2020, the company increased the price of the base model of Alto VX by Rs63,000. After this hike, the new cost of this car is Rs11.98 lacs from Rs11.35 lacs.

If we run the same analysis as above, we will find that Alto VX’s price was Rs9.99 lacs in June 2019, as the US dollar stood at Rs156.78. Meanwhile, Alto VXL reached Rs15.98 lacs in June 2020, from Rs12.95 lacs in June 2019.

Now, if you compare the price hike and dollar rate from June 2019 to August 2020, you will find that the US dollar has increased by 7.03%%, while these two models have seen a price jump of 19.92% each. Meanwhile, Alto VXR has seen the most significant increase of 26.98%, taking its price to Rs13.98 lacs in June 2020, from RS11.01 lacs in June 2019.

Toyota (June 2019-August 2020) 

The company introduced its third price hike in July 2019 by increasing the rates up to Rs830,000. According to that notification, the Corolla XLI MT saw a jump of Rs3.9 lacs, XLI AT saw an increase of Rs4.15 lacs, while GLI MT and GLI AT’s rates were increased by Rs3.85 lacs and Rs4 lacs, respectively. The biggest jump in price was seen for the Toyota Fortuner 4×4, which was Rs830,000.

In April 2020, IMC increased the prices between Rs1.1 lacs to PKR 5 lacs depending on the vehicle. Toyota Yaris also experienced a hike in price. The base variant, 1.3L GLI MT, went up in value by Rs 1.2 lacs. The ex-factory price of the base model stood at Rs 2,469 lacs. After the hike, the price of the top-of-the-line variant increased by Rs 1.5 lacs. The cost of the 1.5L ATIV X CVT stood at Rs 2.95 lacs.

In conclusion, the Toyota cars saw a price increase of up to 27% in this time, with Fortuner seeing the biggest price increase. Meanwhile, the new launches like Yaris also saw a price hike. As mentioned earlier, the dollar price increase in this time period by 7.08%, which is nothing compared to the rise in car prices.

Second Phase (August 2020-April 2021)

So, in the second phase, the car prices kept rising, while the dollar rate continues to come down. Here are some of the examples and comparison.

Pak Suzuki increased its car prices from up to Rs42,000 on October 15, 2020. The company had revised the prices of Alto Wagon R and Swift. On the very date, the dollar price had come down to Rs162.7. On December 1, 2020, Pak Suzuki once again increased the car prices up to Rs100,000. The company hiked the rates of Suzuki Cultus VXL, AGS and Suzuki Swift Automatic Navigation. Interestingly, the dollar rate on the very date reduced to Rs159. But the company continue to increase the car prices.

Meanwhile, Toyota revised the prices of its double cabin (4×4) Toyota Hilux cars. The prices were increased up to Rs492,000. However, the company said the revised prices for four variants are issued after the government imposed 7.5% FED on locally manufactured double cabin cars, while 25% FED was imposed on imported ones under FY Budget 2020-21.

On October 12, 2020, IMC increased the prices of its latest launch, Yaris, by Rs40,000. The notification read that the base variant Yaris 1.3L MT now costs Rs2,509,000, comparing to its old price of 2,469,000. Meanwhile, the 1.3GLI CVT’s new price is Rs 2,689,000, after a jump of Rs40,000 from Rs2,649,000.

Furthermore, the revised rate of 1.3 ATIV MT is 2,619,000, compared to oil price of 2,579,000. The notification also read that 1.3 ATIV CVT now costs Rs2,769,000, 1.5 ATIV X MT costs 2,829,000.

Meanwhile, the price of top-of-the-line variant 1.5 ATIV X CVT reached near Rs3million as its new price is 2,999,000 from its old rate of Rs2,959,000. It means the prices were increased by 1.35%. However, on this date, the dollar rate had come down to Rs162.5 from Rs167, meaning it had seen a reduction of 2.99% till then. 

Over All Comparison of Car Prices (June 2020-April 2021):

To give a detailed comparison between the cars’ current prices versus the prices in June 2019, here is a chart of the price difference. This will help you understand that although the rate is the same, but car rates are not, so you can ask WHY?

Note: Following chart has 2 pages, you can go to the next page from the bottom right of the table.

If we look at the overall price increase from June 2019 to April 2021, we will see that the prices average price increase for Toyota was 18.9%, while it is 31.1% for Suzuki vehicles, compared to 27.7% for Honda. Meanwhile, the dollar increased by 7.08% (from June 2019-August 2020), while it reduced by 8.35% ( from August 2020 to April 2021). However, the prices have increased in both phases. 

What is the Stance of Car Manufacturers?

The car manufacturers have their own point of view over the increasing car prices in Pakistan. To take their perspective, we contacted Honda, Suzuki, Toyota and Proton Motors to take their stance. The representatives of Proton Pakistan and Toyota replied to our queries, while we have not received any replies from other companies.

As per, Proton official, the supply cycle of the auto industry is based upon advanced ordering of CKD and local parts. That is why there is a normal lag of 2 to 3 months, as the inventory at hand is already at the assembly plants. Therefore, if the USD remains at this level for the next 2 to 3 months, then there is no reason why all existing OEMs do not reduce the prices.

Meanwhile, Toyota representatives stated:

As to the vehicle pricing issue, considering forex in isolation is not the correct matrix. As many other factors have to be considered too:

  • Freight Cost:  Container cost has increased by 700%
  • Material Cost: Resin and Steel cost has increased by 61% % and 96%, respectively, globally. Steel, Iron, Plastics and Rubber at average, covers 70% of the material used in a standard sedan vehicle.
  • Overheads: The cost of utilities is consistently being increased as well as overheads in the industry.
  • Air Shipment Cost: Globally supply chain is disrupted as after effect of COVID-19. The industry is absorbing heavy cost to arrange parts through air shipments in an attempt to run the production line smoothly.
  • The increase in RSP is much smaller than the % cost increase in terms of the above factors.

The official further claimed that automakers never passed on the full impact of forex increase to the end-user. Forex increased up to 10% (PKR 170 vs PKR 153), but the RSP increase did not happen at the same level.

Giving the example of the Indian auto market, the IMC official further claimed that in the last 10 years, the average cost of the vehicle in the Indian automobile market has increased at the rate of 6% per year.

What do you think about the relation between dollar rate and car prices? Do you think car manufacturing companies stance is right? Share your thoughts with us in comments section.

 

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