Consumer interests and the auto sector
By Ibrahim Lakhiar
THE din and noise of irrational car craze fuelled by remittances and powered by lease-financing, may have died down, but the appetite of the indigenous auto industry to mint money does not seem to have abated a bit. The industry relishes customers’ helplessness and deny them bookings. Such an abnormal situation runs counter to ‘universal code of corporate governance’. It also reflects adversely on government’s inadvertence to address customers’ concerns, reflected in the media routinely. It was anticipated that import of cars in CBU condition would ease the situation and make availability of cars hassle-free at competitive rates. This has not happened.
The bane of premium or ‘on’ money, coined in local parlance for premium, still rules the roost. Realizing booking charges on the spot, running into thousands, unheard in business channels, is another unholy stain, besmirching the auto-industry.
Delivery of cars at door-steps, the dates dished out by auto sector by months, are a norm not an exception. With a view to make hay while the sun shines, the gimmick of assemblers to release vehicles in the market to regulate quantum of demand for cars with an ulterior motive of maximizing profit-taking, is another attempt to exploit customers’ helplessness.
In the face of such a contrived scenario, the claims of the companies, promising prompt delivery of vehicles, following hyped investment by billions, looks hollow like boastful politicians, promising moon to voters at the time of elections or making country next Asian Tiger,
To cash in on customers’ choice for a popular hue, some dealers do not demur to demand extra bucks, collecting their share in the pound of flesh from their corpus. The government’s directive, binding assemblers, pay mark-up on deposits, if delivery dates exceed two months, is being obeyed faithfully by most assemblers in stark disavowals.
If the prices of cars escalate in-between booking and delivery dates, buyers are barred to cast a passing glance at their dreamt wheelers, until they shed the differential, despite full payment, made in advance. Trade ethics warrant fair play in business dealings. If one makes full payment, one is entitled to delivery of car on the spot.
If, for reasons unknown, it is not possible to deliver and the prices escalate in-between booking and delivery dates, customers are entitled to receive possession of the products at the old price. The differentials could be due, if bookings are made only on token advances. In the past, handsome sums were squeezed from customers, despite full advance payments at the time of bookings.
The pricing of assemblers’ products is also not without concern when compared to cost of corresponding products, prevailing in the neighbouring country. More so, when operating conditions like cheap labour and land, besides knocked off levies, are almost identical in both countries.
My Mauritian host revealed that the sugar sells dirt cheap in his country, because it is manufactured from the sugar cane, grown locally in that country and as such the government does not want to fleece its denizens on the pretext, that the price of the commodity is high in the international market.
Financial benefits, accruing from the steep dip in the exchange rate of the greenback in the past, staying the course for a long time, were not transferred to customers. But, when the value of the dollar appreciated and that too for a very short stint, the assemblers lost no time to raise the prices.
Astonished by unprecedented demand for new cars despite availability of imported ones, assemblers have chosen to use banks and leasing companies to do bookings and perform all unholy acts on their bidding. Charging soaring interest and processing fee by leasing institutions, is yet another issue. The adoption of such a circuitous route is detrimental to customers’ interests, who ultimately end up virtually paying double price, fixed by a company.
The quality of cars, when compared to matching models of imported ones, leaves a lot to be desired. Stunned by over-whelming demand, assemblers churn out units, caring two hoots for the quality of their makes. Scarcely a car escapes the bane to retrace its foot prints to high profiled 3S, for rectification of defects, detected by buyers. Blanket recall by an assembler of a popular make in the past, exhorting customers, reach for removal of defect in the front wheel of their cars, is a case in point.
Car advertisements, almost non-existent during initial years of the craze, now intermittently appear in the print media. These ads, though long on qualities but short on pricing, do not accord well with the basic principle of advertising—-right to choose’ from the lot available in the market. In India, manufacturers do not demur to quote prices in their ads in bold and bright figures to educate their customers, enabling them make right choices.
Financing car buy through leasing has rendered more harm than good to most middle class members, a vanishing breed. No doubt, the introduction of leasing factor in auto industry generates jobs, accelerating industrial wheels, but its side effects prove to be more lethal than all ills, clubbed together, confronting the car market.
Unable to manage hefty instalments, poor purchasers who initially manage down payments, are at pains to pay instalments, beefing up with the rise in interest rates imperceptibly. They default and ultimately find their cars, landing in the junk yard of the leasing institutions, while their down payments and paid up instalments going down the drain. .
Permitting expenditure of big money by billions on pursuits, bordering on luxury as against investment on social sectors, clamouring for funds, nowhere nears the targeted government’s goal of good governance. And the arbitrary extension of the leasing policy to embrace imported vehicles and electrical gadgets mostly made on foreign soil, whirl industrial wheels abroad, veering off policy off the track.
Fearing fierce competition from car imports, the nervous assemblers initially resorted to releasing SOS calls, apprehending annihilation of auto industry. Officials sitting in Islamabad, rushed to their rescue for obvious reasons, clogging labyrinth of several muffled ifs and buts to the import policy.
To please the upper classes, duty slabs for cars used by them above 1300 cc, were substantially slashed, but the poor plebs, going for 800 to 1300cc motors, were denied any such concession. The end result is, that we are back at square one while the auto-sector continues to go from bad to worse.
The government would do well to allow unfettered import of cars of the make, made indigenously by slashing import up to 1300 cc and withdrawing lease-financing, until sanity prevails in the market. The action would at least end agonies of Karachiites, who take pummelling with the emergence of 400 four-wheelers on the rough and uneven roads every day.