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Sunday, October 2, 2022

Pakistan’s auto industry fears almost 30% dip in car sales due to increased taxes and rupee devaluation

Pakistan’s auto industry is experiencing a significant decline in car sales as a result of the nation’s looming economic catastrophe. During this fiscal year, car sales in Pakistan may decline by 30%, according to reports. This is thought to be a direct result of the new government’s policies and higher taxes on new cars, which are struggling with a financial shortage.

Pakistani automakers predict that the new tax rule, along with rising gasoline prices and Pakistan State Bank’s limitations on imported auto parts, will cause a spiraling increase in the cost of automobiles.

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The capital value tax (CVT), which is one percent and is applied to automobiles with engines larger than 1.3 liters, has been increased by the Pakistani government for both filers and non-filers. 

Car sales are also projected to decline as a result of regulations governing auto finance and higher auto loan interest rates. According to a report by Pakistan’s Dawn newspaper, automakers may raise the price of their automobiles in response to the weakening Pakistani Rupee and rising costs of foreign auto parts. According to the survey, rising freight costs and a weakened currency could cause vehicle prices to rise after Eid.

As part of its efforts to revitalize the economy, Pakistan has imposed a restriction on imported automobiles. The prohibition, which Prime Minister Shehbaz Sharif declared shortly after taking the oath of office, is intended to help Pakistan conserve “valuable foreign cash.”

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According to the report, Pakistan Suzuki is the most recent automaker to cease accepting reservations for their vehicles as of July 1. Prior to this, in May, Lucky Motor Corporation Limited and Indus Motor Company had carried out the same action. The State Bank of Pakistan prohibited the issue of letters of credit for imported car parts and accessories starting on May 20, therefore choices were made in response.

One of Pakistan’s leading automakers, Indus Motor Company, receives about 26% of its revenue through auto loans. 35% of Pakistan Suzuki’s revenue comes from consumer loans. Suzuki, however, decided against raising Kia car prices out of concern for a 30% decline in sales.

Three Sportage models are now between PKR 53,000 and PKR 64,990, and three Sorento models are now between PKR 68,360 and PKR 74,990 as a result of the government’s decision to raise taxes on new cars.

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According to Honda Atlas Cars Limited, the CVT on the two modes of the Honda BR-V hovers between PKR 42,490 and PKR 42,740 while the 1% VT on the City 1.5 varies between PKR 35,890 and PKR 38,990. Six Honda Civic variants with 1% CVTs range in price from PKR 55,490 to PKR 66,740. Additionally, dealers have been told to charge income tax filers PKR 10,000 for Alto, Bolan, and Ravi.

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