Price increases by automakers have become a burden for Pakistani automobile consumers. It has eliminated not only the purchasers’ capacity to acquire new cars, but also used ones.
Since 2019, when prices last experienced a significant increase, used automobiles have become increasingly valuable. Even old used cars are reportedly now being sold in the market for enormous amounts.
The study quotes Optimus Capital Management (OCM), a Karachi-based analysis firm, which claims that a person who purchased a new Toyota Corolla in 2018 for Rs. 2 million may sell it in the used car market for Rs. 3.2 million, which is a gain of 60% before accounting for inflation.
It also alluded to the issue of personal money by suggesting that dealers or “investors” pre-purchase many cars before selling them for exorbitantly high unlawful prices.
It stated, published research from the Pakistan Institute of Development Economics (PIDE), that 90% of the vehicles purchased by Pakistani consumers over the previous five years cost them Rs. 170 billion in “own money.”
According to Muhammad Faisal, president of Lucky Motor Corporation’s (LMC) automobile branch,
The investor’s objective is short-term financial gain. When we speak to other global manufacturers, they are amazed that people give extra money to buy a car.
According to several experts, this peculiar market dynamic is partly caused by a suffering state economy. Tundra Fonder’s chief investment officer, Mattias Martinsson, said:
In most of our markets, which have relatively stable currencies, we didn’t notice this factor. But Egypt has similar characteristics to Pakistan’s automobile industry.
Are automakers at Blame?
The PIDE report referenced earlier asserts that automakers are purposefully slowing down output. Added is:
Economic theory says that monopolists will supply less than market demand even if it means retaining spare capacity on hand. In keeping with this practice, car assemblers have a capacity of 400,000 units but produce only 200,000 a year, ensuring a shortage prevails in the market.
According to the study, the continuous oligopoly in the car sector has stifled consumers’ voices. The industry has been in the same deplorable condition for the last 50 years, and it continues.
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