KARACHI: Several factors including weakened purchasing power, burdensome taxation, pervasive inflation, and currency devaluation, have compelled automobile manufacturers to slash prices. While this maneuver may diminish profit margins, it ultimately benefits consumers and bolsters the beleaguered industry.
Financial experts said that the recent governmental decision to increase the sales tax on vehicles with engine capacities of 1,400CC and higher, as well as those priced beyond Rs4 million, from 18% to 25%, has negatively impacted the automotive sector. They emphasized that this uptick in sales tax, mandated by the government and the Federal Board of Revenue (FBR), prompted automobile manufacturers to reduce prices, sacrifice profit margins, and develop consumer-friendly strategies.
Experts pointed out that four primary challenges—high interest rates, onerous taxation, rupee devaluation, and inflation are significantly impacting the automotive industry. They urged the government to devise coherent and pragmatic policies to improve sectoral growth, cautioning that without such interventions, automobile plants may become economically untenable, leading to heightened unemployment.
In the fiscal year 2021-2022, more than 300,000 vehicles were sold, contributing to substantial government tax revenue. However, amidst ongoing economic adversities such as soaring interest rates and inflation, the anticipation of additional tax burdens is likely to precipitate a significant decline in car sales, with forecasts estimating a range of 80,000 to 90,000 units for the period spanning 2023 to 2024, remarked Abdul Rehman Aizaz, Chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM).
Honda Atlas Cars has recently slashed the prices of two City variants to Rs4.649 million and Rs4.689 million, marking reductions of Rs50,000 and Rs140,000, respectively. Similarly, Indus Motor Company (IMC) has implemented price cuts across its Yaris sedan lineup, with reductions ranging from Rs73,000 to Rs133,000. These adjustments affect four Yaris variants, now priced between Rs4,326,000 and Rs4,766,000 per unit.
