Car prices soar amid rising auto-part imports.

While already struggling to rein in the prices of sugar, wheat flour, ghee/cooking oil, steel bars and cement, Prime Minister Imran Khan has now vowed to tackle the issue of high car prices and low auto-part localisation.

In the last week of 2020, the federal cabinet directed the Ministry of Industries and Production (MoIP) to look into the production capacity of existing carmakers that have failed to increase their output in line with market demand.

The cabinet directed the MoIP to look into the reasons as to why the foreign automobile manufacturers failed to indigenise car assembling through deletion programmes. The cabinet asked the ministry to make a presentation on this issue.

The prime minister asked Minister of Industries and Production Hammad Azhar to find out why the three main auto companies, which have been doing business for up to four decades, have failed to localise the manufacturing of spare parts.

Despite claims of high localisation, buyers witness multiple price increases every year

According to the Pakistan Bureau of Statistics (PBS), imports of completely and semi-knocked down kits (CKD/SKD) for cars in the first half of 2020-21 swelled by 63 per cent to $372.6 million on rising car sales.

The prime minister was informed that the shortfall in the supply of locally assembled cars was leading to black marketing. Dealers were charging a premium or 'on money' for immediate delivery.

It can be cautiously said that the auto sector's stakeholders are more powerful than those of food and construction material sectors. Car assemblers dealt with previous enquiries by relevant ministries rather easily. They know how to handle the latest concern expressed by the prime minister.

Like the enquiries into sugar and wheat crises followed by soaring prices of steel bars and cement, the latest investigation into the auto sector may die its own death soon.

Despite claims of higher localisation of over 94pc in 70cc bikes and 60-65pc in cars, consumers witness multiple price increases for two- and four-wheelers every year. Assemblers blame the hikes on the rupee-dollar parity and surging raw material prices.

The government did not ask car and bike assemblers why they failed to pass on the recent impact of low import costs to consumers. The rupee recovered against the dollar from Rs168 in August 2020 to the current interbank market rate of around Rs160. One of the assemblers raised prices twice amid the closure of plants and dealership network...