Local Cars – Profitable Asset Than Gold & Real Estate

Gold, real estate, and stock exchange investment have always been considered profitable in Pakistan. On the other hand, automobiles have always been considered products that depreciate in value with time. However, in Pakistan, this has not been the case. In the last couple of years, the car’s value doesn’t depreciate but appreciates with time, especially in the case of locally assembled vehicles.

In the last few years, the prices and profits of local cars have increased double-fold. If you have ever visited a car dealership, especially Big 3’s, the salesman must’ve mentioned the excellent resale value of the said car. Why? Because he knows that the people in Pakistan buy the car, keeping in mind that they will sell it with a profit after some years. And with time, cars have actually become an asset, especially since the prices have hiked repeatedly in the previous 2-3 years. And we have numbers to prove it. 

Local Cars In Pakistan vs. Assets 

A recent report by Ismail Iqbal Securities (IIS) compares “Asset Class Returns vs. Car Prices,” and the results are rather shocking. As per the data, these are the profits from the famous assets:

Meanwhile, the returns from cars are:

Commenting on the situation, economist Ammar H. Khan tweeted:

IIS has used the date from August 2022 to October 2022, and it has used top-of-the-line variants’ prices for the cars. This small comparison shows how much a car has become an asset in Pakistan. And interestingly, this huge profit has been earned by investors through the “ON Money” culture thriving in the local car market. To avoid a long wait for car deliveries, which usually ranges from 7 months to one year, the consumers buy the cars on “ON Money” to avoid any hassle and repeated price hikes. And this leads to huge profits on these cars.

Another reason behind this is total absence of competition for local cars because the import of used cars is banned for multiple reasons. So, instead of increasing quality and features to compete with imported cars, the local car companies have increased prices and, interestingly, with imported parts. Although the first Auto Policy of Pakistan was focused on growing localization for the auto industry, these companies have been importing major components, which is directly linked to the dollar rate; hence the repeated price jumps.

There must be competition for the local car companies so that they would focus on increasing the quality and features of their products.

What do you think about cars becoming assets? Please share your thoughts in the comments section.

 

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