Price cuts are demanded by the auto industry. Market analysts expressed their unhappiness with inadequate economic policies to The Express Tribune. They stated that the auto industry has been negatively impacted by the government’s recent decision to increase sales tax from 18% to 25% on automobiles priced above Rs. 4 million and with engines larger than 1,400 cc. They emphasize how the Federal Board of Revenue (FBR) and the government imposed an increase in sales tax, which compelled automakers to reduce prices, give up profit margins, and adopt customer-friendly tactics.
Customers would have paid at least Rs. 280,000 more per vehicle if companies had passed on the full 7% rise in sales tax on automobiles priced just over Rs. 4 million. To keep these cars in the 18% sales tax category, however, businesses decided to lower prices rather than transfer this cost to consumers. Customers end up paying the most for these sales taxes.
Experts have identified four primary issues that significantly affect the auto sector: inflation, the depreciating rupee, high taxes, and interest rates. They stress that rational and uniform regulations must be developed by the government to promote the expansion of industry. They issue a warning that, in the absence of such measures, auto factories might become unprofitable, which would result in an increase in unemployment.
Between 2021 and 2022, the government received a substantial amount of revenue from the sale of over 300,000 cars. According to Abdul Rehman Aizaz, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), the imposition of additional taxes is expected to significantly reduce car sales; estimates range from 80,000 to 90,000 units during 2023–2024. The current economic difficulties, which include inflation and high interest rates, are to blame for this.
The retail prices of two Honda Atlas Cars City models have been reduced by Rs. 50,000 and Rs. 140,000, to be Rs. 4.649 million and Rs. 4.689 million, respectively. Similar price reductions were recently made by Indus Motor Company (IMC) on the whole Yaris car series, with reductions ranging from Rs. 73,000 to Rs. 133,000. The four Yaris versions affected by the pricing modifications are now priced between Rs. 4,326,000 and Rs. 4,766,000 per unit.
IMC CEO Ali Asghar Jamali did not provide any more information beyond attributing the pricing reductions to an internal strategy.
Reduced inflationary pressure and cheap auto loan interest rates are anticipated to increase sales soon, according to Waqas Ghani, Deputy Head of Research at JS Global.
Abrar Polani, a research analyst at Arif Habib Limited (AHL), a trading business, observed a decline in demand for cars in the region. The goal of the car price reduction is to aid in the rehabilitation of the industry.