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Here’s Why Some Cars Are Getting a Massive Drop in Prices

Over the past few days, the automotive landscape in Pakistan has witnessed a surprising turn of events, with several car manufacturers announcing substantial price reductions for their vehicles.

The trend began with Kia announcing a whopping reduction of over Rs. 15 lac for its Stonic model, followed by Peugeot 2008 with a Rs. 4.5 lac decrease, and Suzuki Swift with a notable Rs. 7.1 lac drop. Such drastic price reductions are rare in Pakistan’s automotive industry, prompting questions about the underlying reasons.

Economist Reveals Reason Behind the Price Drops

Renowned economist Ali Khizer shed light on this new trend, offering insights into the factors influencing the recent price adjustments. Notably, the revised prices reflect significant reductions, with Stonic’s price slashed by 24%, Swift’s by 13%, and Yaris 1.3 CVT and City CVT by 3% each.

Impact of New GST Regulations

One of the key drivers behind the recent price reductions is the implementation of revised Goods and Services Tax (GST) regulations. Khizer highlights that the new price range for cars now falls between Rs. 4.69 million and Rs. 4.77 million, down from the previous range of Rs. 4.83 million to Rs. 6.28 million. This notable revision underscores the profound impact of the 25% GST on cars.

Ex-GST Prices and Regulatory Changes

Khizer elucidated the regulatory changes that have precipitated the recent price adjustments. In March 2023, the government raised the GST on cars with engine capacities of 1400cc and above to 25%, up from the previous 18%. While most cars remained unaffected, Stonic bore the brunt of this decision, with a significant price increase.

Strategic Moves by Automakers

However, in March 2024, the government introduced further changes, imposing a 25% GST on all cars with ex-GST prices exceeding Rs. 4 million. In response, Toyota and Honda swiftly reduced their car prices, ensuring that their variants remained below the Rs. 4 million threshold to mitigate the impact of the new tax. Following suit, Kia and Suzuki strategically reduced the prices of Stonic and Swift, respectively, to align with the revised GST regulations.

Implications for Consumers and Market Competition

While regulatory changes primarily drive the motive behind the price reductions, consumers stand to benefit from the more affordable pricing of these vehicles. Moreover, the competitive landscape in the automotive market is poised for further evolution, with speculation rife about potential price adjustments from Toyota and Honda to remain competitive with Suzuki and Kia.

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  • Prices after reduction are still on very higher side, the purchasing strength of common person is hampered a lot, people are hesitant to purchase resulting in low production by manufacturers.

    Another aspect is that how these manufacturers are keeping their nett profits, a reduction of Rs. 1,500,000 by KIA shows how much they are fooling people till now with huge profits, also with a reduction of MRs. 1.5 I suspect that their nett profits are much higher assuming at least another MRs. 1.0 to 1.5.

  • So you mean that X-GST prices of these cars are less than 4 million 🤔
    Then why did Peugeot decreased their price slightly and the car is above 6 million. Same goes for Changhan X7 at 8 million.
    Something doesn’t make sense here.

  • One of the important reason of reduction in price is due to slow economic growth, high interest rates and low demand of specific vehicles variants. The cost of holding inventory is substantially high as compared to disposing off on low price. This step helps in financial management of manufacturers to get rid of financial burden in high interest scenario.

  • Stupid reasoning and false assessment. The prices of Yaris, City and all other cars mentioned in this article are more than 4 million.

  • But the cars are still above 4 Million so how they have mitigated the tax ???

  • Article is written just for the sake of writing it, while so-called renowned economist has presented this lame theory for the sake of presenting it, it doesn’t make any sense, nor relating to the figures.

    it seems that the automotive industry has been earning huge profits and impacting adversely to the economy by importing goods of 7 billion dollars annually.

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