In the year 2019, the cars prices were increased up to 29 percent due to which companies were able to sale cars in very less numbers. During the previous year car sale dropped down to 33 percent and automobile industry sold only 32504 cars from January to November 2019.
According to the experts, one of the reasons in car sale decline is the filer and the non-filer issue. Government wants to extract tax from their citizens and wants every citizen to become filer. Government wants people to become filer to show their assets. Government says that they will give discount on tax to filers whereas non-filers will have to pay double tax when it comes to buying cars.
Due to massive drop down in cars sale, car prices should also have
been dropped but it never happened. Increase in car prices was still continued. The biggest reason of increment in car prices is said to be the increase in Federal Excise Duty on cars. The excise duty imposed on cars has been increased from 5 to 7 percent. Another reason of higher car prices is the drop in Pakistani Rupee (PKR) value against US Dollar.
Increased dollar price is a massive factor in increasing car prices. Almost 90 percent of car spare parts are imported from other countries. Automobile dealers say that they have to pay in dollars in order to buy car spare parts which prove to be very costly.They also say that FBR ( Federal Board of Revenue) needs to change policies regarding businesses in Pakistan. FBR could change things by going easy on traders. They should make people’s life easy by imposing minimal taxes. Otherwise car manufacturing units will lessen the production of cars and more employees will be fired from their jobs resulting in unemployment.
Pakistan’s automobile industry is in huge trouble. Due to increased car prices, now people are opting for used cars. Things are going down from bad to worse for top three automobile manufacturers in Pakistan. There is a drastic drop in the sales of locally assembled new cars. Demand and supply forces have pushed used car prices upwards. Also the consumers who preferred two to three year’s older cars are now preferring three to five year’s old used cars because of fall in their income. More taxes simply resulted in higher prices and lower demand.
The major problem in the automobile industry is the supply not the demand. The local automobile industry has not the capacity to meet demand. As a result automobile industry has to import cars’ spare parts from other different countries. When they pay in dollars for these parts the manufacturing cost goes up which in turn results in increased car prices. This problem could get solved if government allows more and more foreign companies to open automobile industries in Pakistan so that we don’t have to import any thing from other countries and brake could be applied to moving car prices.