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Car Sales Will Drop in Coming Days: Report

In a recent uncharacteristic change of pace, the growth of the local auto industry has slowed down considerably, with the government and the State Bank of Pakistan (SBP) working out ways to manage the towering import bill.

Business Recorder highlighted that despite the arrival of new vehicles in Pakistan, sales are likely to take a hit in the coming days due to the prudential steps by the government.

Along with SBP’s plan to restrain the imports of Completely Built-Up (CBU) vehicles by enforcing restrictions on their financing, the regulatory bodies are considering imposing policy rate hikes to increase interest on auto loans on top of the recent increase in car prices.

The government plans to impose a number of taxes on CBU luxury vehicles to restrict their soaring demand. These measures have created a stark comparison between the growth rate of the auto industry a few months ago and the current growth rate.

The report highlights that recent reliefs were intended to enable companies to rise to the ‘local car manufacturer’ status. Conversely, all the automakers and the newcomers, in particular, began elevating prices of their vehicles on account of unforeseen issues such as:

  • Semi-conductor chip crisis.
  • Shortage of raw materials.
  • Increased freight charges.
  • Depreciation of the local currency.

The Problem Persists

Policymakers have come to realize that car prices, sales, and production cannot be controlled by reducing taxes. Reports from all over the world indicate that car prices are likely to continue surging as the aforementioned issues will probably remain throughout the year.

The report mentioned that it was perhaps part of the government’s agenda to reduce taxes and draw new players into the market before regulating the prices.

The government is currently mulling over the imposition of various taxes and other restrictions to discourage the import of CBU vehicles whereas SBP has increased interest rates to curb CBU imports.

The government is also planning to constitute a committee to fix prices and discourage car companies from increasing them. The Ministry of Industries and Production has also proposed the establishment of a regulatory board that will predetermine the prices of cars.

However, the government is considering the viability of this proposal and is yet to issue a decision about it.