LAHORE: Decline in car sales forces a reduction in prices globally but it triggers an increase in rates in Pakistan where car assemblers are overprotected and shielded from the competition of imported vehicles. The car assemblers in Pakistan justify the increase in prices on the basis of rupee depreciation against Japanese yen and increase in commodity prices. The prices of steel and plastics have come down by over 60 per cent.
The rupee has appreciated by 15 per cent from its lowest point and yet these companies have the audacity to further increase the prices. This is a strange phenomenon, which is difficult to understand. Tractor and motorcycle prices have remained stable why then cars are an exception. A number of vendors say the assemblers have forced them to reduce prices of auto parts to previous levels after the global decline in steel and plastic rates.
The current price increases are nothing but a result of a monopolistic approach by the companies. One has to ask the question whether these companies are really bothered by the fact that the ever-increasing prices of cars will do nothing but further cause a dent in their sales. A rationale view would give a clear picture why they continue to do this. Since these companies have secured a captive market they know that the consumers cannot go anywhere. They have government protection by putting forward the fact that because of them the auto part manufacturers exist. Whilst in reality the assemblers over the last three years have indirectly caused closure of dozens of auto part makers by importing components they could have easily procured locally.
The fact is that the local assemblers are doing no one any favour. They are successfully creating jobs in their parent countries by assuring inflated pricing structures of their products in countries like Pakistan and fattening only their balance sheets for further repatriation abroad. Recent investments announced by them had inflated prices attached to the machinery and technology provided to them by their parent companies and this covered up two very important factors from the local shareholders.
First, the company profit remained highly depressed from the actual picture and second, the parent company benefited from profits tax-free. It is high time that the government take a serious look into the whole episode as to why even after 25 years the car sector has failed to go beyond into localisation of high technology items, which eventually they had again committed when accepting the Auto Industry Development Policy. The Consumer Protection groups and the Competition Commission of Pakistan also seem to be sleeping over these issues.
If these multinationals have only one agenda of just making money in a country like Pakistan and are offering no increasing collateral benefit like technology and employment then it is best to bring down their CBU tariffs to well under 20 per cent at par with protection provided to other domestic industries and let the public enjoy a corolla for a cheaper price of US$10000 then the current US$20000.Unless a competitive environment is created in Pakistan the automobile sector will not provide good value for money to the Pakistani public nor will it support a vibrant auto parts vending industrial base which could give Pakistan employment and technology growth.