Car buyers in Pakistan have become increasingly burdened by price hikes by automakers. Buying brand-new cars has become impossible, as well as buying older ones.
There has been a surge in used car values since 2019, the last time prices surged massively. The market is now selling even old used cars for huge profits, according to Bloomberg.
The report cites Optimus Capital Management (OCM), which states that a person who bought a new Toyota Corolla for Rs. In 2018, Rs. 2 million can be sold on the used market. 3.2 million, or a 60% increase.
Additionally, it mentioned the own money issue, stating dealers buy many automobiles in advance and resell them for high prices. In the last five years, 90% of Pakistani cars have been bought by Pakistani customers with their own money, according to the Pakistan Institute of Development Economics (PIDE).
President of Lucky Motor Corporation’s automotive division, Muhammad Faisal, states:
It amazes us that people are willing to pay more for a car, when they compare to other global manufacturers.”
Experts also suggest that a struggling state economy is the reason for the strange market dynamics. Managing Director of Tundra Fonder, Mattias Martinsson, said:
We didn’t notice this factor in most of our markets, where currencies are relatively stable. But Egypt’s automobile industry is similar to Pakistan’s.
Who’s to blame?
Moreover, the PIDE study claims that auto companies deliberately stall production. It adds:
According to economic theory, monopolies should retain spare capacity even if that means supplying less than market demand. Car assemblers are known to manufacture about 200,000 cars each year.
Oligopolies dominate the automotive industry, muzzling the consumer voice. Industry bad luck has characterized five decades.
In spite of criticisms that auto companies facilitated the own money culture, manufacturers continue to face a long-standing production crisis.
In the meantime, foreign automakers like Honda Atlas Cars Limited, Hyundai Nishat Motors Private Limited, and Pak Suzuki Motor Company, are taking regular non-production days.
The car industry has attributed supply chain problems to the decline of the economy as well as government sanctions on imports.