LAHORE: Your dream of having a new car without paying heavy own-price (black market on cars’ factory prices) may now come true, as the own-prices on local cars have registered a drastic slump in the city’s auto market due to higher mark-up rates on the one hand and the rising imports of reconditioned cars on the other.
Besides the own-price phenomenon, another major factor leading to this situation is said to be the market of secondhand local cars where business activity has come to a halt in the last two months because of the ongoing standoff in the sale of new models. Market experts have predicted further depression during the month of Ramadan.
Meanwhile, the makers of Revo, a locally manufactured low range car, have put it on display with an affordable price tag, i.e. Rs 279,000, without any own-price on it.
Similarly, Germany’s auto giant, Porsche, has also announced sale of its sports car in the city by the mid of next year and Nissan Ghandhara, a local car manufacturing group, has announced four new models for its customers. Such fundamental developments, especially liberalisation of the import policy in the Trade Policy 2005-06, has put the auto market in a topsy-turvy situation and the days are not far away when the high temperature of auto fever would come down with the narrowing of the supply and demand gap, say the market experts. Dwindling own-prices: The own-price mechanism has been hit badly with the increase in mark-up rates coupled with the rising imports of reconditioned cars from Japan, Dubai, Thailand and other destinations. Banks have withdrawn attractive packages under auto financing with the increase in interest rates and the market has almost emptied “pay-order customers” at present. Every model of any brand is though available easily in the market, but auto dealers are suggesting to their customers to wait for another week or so for a reconditioned car from Japan, a trend that has affected the demand for local brands. Sheikh Hafeez Ahmed at HN Motors, a dealer of Honda Motors on Jail Road, informed Daily Times that the own-price on 1600 cc and 1800 cc models of different brands, especially those of Honda cars, has come down to zero from Rs 170,000, prevailing in the market prior to the announcement of the Trade Policy 2005-06. “The own-price on 1300 cc cars has come down to Rs 150,000 from earlier Rs 200,000,” he said, adding: It has come down to Rs 25,000 from Rs 75,000 on 1000 cc cars and Rs 75,000 from Rs 100,000 on 800 cc cars,” he added. Sultan Ahmed, another car dealer, predicted that the own-prices would come down further with the arrival of the first lot of reconditioned cars by next week.
According to the dealer, the own-price on 800 cc cars may maintain considerable level due to their higher sale and no trend of importing small-reconditioned cars yet.
“The own-price phenomenon may not be relevant to the market in near future,” he added.
“Easy availability of fully-loaded imported cars would fill up the demand and supply gap in the market that would give way to quality products locally as well,” said Rana Naeem Akhtar, front office manager at SAMA showroom. The prices of real estate prices across Jail Road, hub of auto dealers of new and secondhand vehicles, have climbed up abnormally, as new investors have jumped in the market with the government’s permission to import reconditioned cars.
Reconditioned cars: The relaxation in the import of three-year-old vehicles under the Trade Policy 2005-06 as against two-year-old models in the last fiscal year under the gift and personnel baggage scheme has encouraged investors to import cheaper cars. The secondhand car dealers had anticipated arrival of 30,000-35,000 secondhand cars in the current fiscal year following the government’s decision to amend the baggage, transfer of residence and gift scheme for secondhand cars under the Trade Policy.
According to them, an estimated 13,700 secondhand vehicles of various engine capacities had already landed in Pakistan during 2004-05 under the baggage, TR and gift scheme. “The market, dominated by locally assembled cars, is now set to become highly competitive with the advent of used cars in large number. Consumers will have a wider choice to select cars,” All Pakistan Motor Dealers Association Chairman H.M. Shahzad said while hailing the liberalisation of the import of vehicles announced by Commerce Minister Humayun Akhtar Khan.
Imad Ullah Sheikh, secretary general, Jail Road Traders Association, said the first ship of reconditioned vehicles has reached Karachi port and the bulk of reconditioned vehicles would be in the market in the next two weeks, which would further depress the local market.
A good number of Japanese brands including PLATZ, VITZ, DUDE, Japanese Corolla and Daihatsu Jeep (650 cc) are being flooded in Pakistan and more are about to come. There is a psychological change in the customers’ thinking that they can get fully loaded vehicles at a price below Rs 2 million, he said. “Even a 1000 cc reconditioned car would be available at Rs 700,000 to Rs 800,000 with all type of accessories,” he said, adding: “The situation would be different for the customers now comparing to what they have witnessed when they had no option but to get a car on lease.” Regarding the duty slab on the import of reconditioned cars, he said: “Officials at the Karachi Customs are charging $4,000 for below 1000 cc reconditioned cars, $5,000 for 1000 cc reconditioned cars and $10,000 for 1300 cc to 1800 cc reconditioned cars at Karachi port.”
As a matter of fact, said Shahab Khan at Saleem Motors, 60 percent of the investors had diverted their money to import reconditioned cars from Dubai and Japan, a phenomenon that has badly hit the local market.
Revo: a locally manufactured car: A leading industrialist in Karachi, Feroz Khan, had manufactured and dispatched four Revo cars to Lahore a day earlier. Revo is the first-ever made in Pakistan car costing Rs 279,000 and it would be available at booking price.
Porsche from Germany: Similarly, the sports car lovers would also have the option to get Porsche from local market by the mid of 2006. The top management of Porsche announced last month at a local hotel that they have decided to launch their vehicle in the city.
The car dealers, however, are not very confident about its demand. “Usually gamblers buy such a high-cost car,” said Imad Ullah with a smiling face, adding: “There are few who would spend Rs 10.25 million for a sports car like Porsche.” 4 new models of Nissan Gandhara: President Nissan Gandhara Lt Gen (retd) Ali Kuli Khan Khattak also announced two weeks back that the Gandhara Nissan has decided to roll out four vehicles in Pakistan, besides leasing its additional assembling facilities to Chevrolet and Renault. Depressing secondhand cars market: Contrary to the hope that high markup rates would encourage the sale of secondhand cars, the secondhand cars’ market is facing a standstill-like situation.
Dealers in secondhand cars have said that the rising import of reconditioned cars has also affected the secondhand cars’ market, as the majority of investors are found preferring imported cars to the local ones in quality terms.
Mohammed Ahsan, a dealer of secondhand cars in Samanabad market, said: “The customer is more interested in purchase of imported reconditioned cars than secondhand car from local market.” There is a general impression among the dealers of secondhand cars that the reconditioned cars do not have resale value. But the importers of reconditioned cars deny this claim while claiming that Japanese exporters make sure the availability of spare parts of their vehicles across the world. There is also a group of dealers in secondhand auto market, which believes that the market would rebound by the mid of Ramazan, as people start spending before Eid every year. Auto dealers, bankers and customers strongly believe that the sale of local car manufacturers will be affected badly in case they do not rationalise their prices and improve the quality of material used in the make of cars.
They have favoured the import of reconditioned cars under the liberalisation strategy adopted by the government in the Trade Policy while arguing that it is a right of the consumer to get the best available thing at competitive prices anywhere from the world.
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