Following the increasing rates of the US Dollar in Pakistan, the country is suffering from high inflation. Gradually everything rose in rate because of direct or indirect connection of prices of goods with USD. Car prices too went through a hike.
Effects Of Increase In Car Prices
Hyundai Elantra and Sonata price hike, KIA Price increase, and all the other major companies like Honda, Toyota and MG have undergone a hike. US Dollar degradation caused all these worse situations. It made the purchase of vehicles impossible for the middle class because the rates went high enough to make a car purchase out of reach. A large number of the population belongs to middle or lower middles class and keeping in view the needs of the days, the car is a necessity.
Right now, the USD rate is falling which is increasing the chance that car prices will also fall proportionally. The PKR rate upgradation is because of the IMF’s release of loans, reduction in imports, State Bank of Pakistan’s action against dollar hoarders, improvements in the Pakistan Stock Exchange (PSX). After all this, do you think the car prices will fall down?
How Is Car’s Rate Linked To Dollars?
Almost, all of the cars are either being imported from other countries. If some are assembled here, the components are dependent on imports from other countries. This high dependency makes USD an important factor because as soon as the USD rate rises, the prices of components and cars go high.
This is why our auto industry was deeply affected by this situation. However, the situation seems to be better from now on if the prices keep falling.
Will Prices Fall?
The dive of USD from Rs. 250 to Rs. 224 has risen a spark of hope for the car buyers and their confidence rose. However, the customers are too quick in making this judgement. Because car prices are not going down instead they will remain the same.
Why?? Because cars are dollar-denominated assets that have an underlying value in terms of dollars. Ammar Khan, an economist tweeted, “Car companies have over Rs. 180billion as advance payments because cars have become a dollar-denominated asset. So no, prices wouldn’t reduce.”
This indicates an increased demand for cars which manifests a simple economic concept that if the demand goes up, the price doesn’t seem to be coming down.