Minister for Industries Syed Murtaza takes notice of rising car prices

May 12, 2022 (MLN):  Federal Minister for Industries and Production Makhdoom Syed Murtaza Mahmud has taken the notice of massive hike in locally assembled cars and asked the Engineering Development Board (EDB), the automakers’ regulator to submit a brief report on the responsible factors behind the surging prices.

He has also asked for details pertaining to late deliveries, federal excise duty, additional customs duty, dollar impact, raw material, and freight charges.

The Minister was of the view that strict action should be taken against companies on late deliveries while EDB was also asked to submit tax proposals in order to cut car prices.

 On Wednesday EDB said that it was now evaluating cost increase details shared by original equipment manufacturers (OEMs) that were summoned for a meeting to justify the frequent increase in car prices, as reported by The News.

EDB General Manager (Policy) Engr Asim Ayaz said that the reasons for the price increase were discussed with the auto assemblers. “The assemblers said the increase in dollar rate, raw material cost, shipment cost, and utility cost were the reasons (for the frequent price increase of cars).”

To a query whether EDB was satisfied with the OEMs response, he said that their claims were “under the process of evaluation”.

Meanwhile, a day after the meeting, Pakistan Automotive Manufacturers Association (PAMA) released an official letter to the EDB telling the reasons for the frequent price increases.

“We are pleased to share the factors which have severely impacted the cost structure of the vehicles manufactured locally since July 2021,” read the letter.

“The value of the rupee is constantly depreciating and there is no respite in sight. Freight has skyrocketed to a phenomenal degree and become a crucial factor in the price increase. FED increased, the wage increased, utilities increased,” read the letter.

The letter further added that the KIBOR rate has also been increasing. “Until recently it was less than 10 percent, now it is hovering around 15 percent,” it added.

The PAMA letter further said that within six months, there has been about a 70 percent increase in the prices of steel products, while the price of aluminum has also increased.

“Due to production cuts by China, there is a shortage of supply and the price of this metal has substantially increased in the international market. Moreover, the prices of resins and thermoplastics have increased by about 50 percent in recent months,” the letter read.

PAMA also submitted suggestions regarding the menace of on-money.

“Keep the guideline flexible for the amount of partial payment and the delivery period. Provide a range from 20 percent to 100 percent partial payment and let each company select according to their market dynamics,” PAMA suggested to EDB.

“Late delivery period penalty be enhanced from 60 days to 90 days. Reduce KIBOR +3 percent rate to KIBOR only. Because the SBP policy rate has been increased to 12.25 percent, which is quite substantial and heavily affects profitability,” it added.

The News further noted that the meeting on Tuesday was called after the government took notice of frequent price increases by the assemblers.

For the second time in less than two years, the government threatened regulatory measures against auto assemblers, which might include fixation of prices under the Price Control Prevention of Profiteering and Hoarding Act, 1977.

They were asked to share their cost structures and justify price increases or face regulatory measures.

Some of the assemblers have declined to share their cost structures, and said that it was classified information, it added.

However, they have come forward to explain the reasons for the frequent increase in prices.

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Posted on: 2022-05-12T15:12:36+05:00