By Shahab Omer
A
nyone that has ever bought a car in Pakistan knows the struggle of what is colloquially known as the ‘on’ price. This is the extra money that a person has to pay to buy a car and drive it home straight away without months of waiting. Why this exists is a long and complicated story. In essence, it is car dealerships that book a large number of vehicles and then prey on the weak supply chain of auto assemblers in the country to hike up prices and make massive profits. It is essentially paying a premium just to have timely delivery. In the past month, even as Toyota, KIA, and others have raised their prices and more cars than ever have entered the market ‘on’ prices have risen. However, with the diversification of Pakistan’s car market and the emergence of new categories like the crossover SUV, will the trend of on prices continue, or is there a change in the offing?
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The state of the industry
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espite the depreciation of the rupee and persistent inflation in Pakistan, the last few months have seen a marked increase in production and sales of new vehicles. According to the data released by Pakistan Automotive Manufacturers Association (PAMA), during the first eight months of the current fiscal year, the sales of vehicles has increased 57.7%, trucks 82.2%, jeeps / pickups 51.5% and farm tractors 6%. According to the same data, vehicle sales in the first eight months of the current fiscal year increased to 149,813 units from 95,139 units in the previous fiscal year. One of the major reasons for this is the culture of ‘on-money or premium money’ in the automotive sector of Pakistan even today. When the new auto policy was introduced by the government, it was claimed that the policy would help eradicate premium money culture and in order to eradicate the culture in the policy, an additional tax of RS 50,000 to RS 200,000 was levied on vehicle registration.
For example, if a vehicle is booked in someone else’s name and the vehicle will be registered in someone else’s name at the time of delivery so, depending on the CC of the vehicle, additional tax of RS 50,000 to RS200,000 has to be paid. Under the policy, car manufacturers are required to deliver the vehicle within 60 days of booking, otherwise the company will be bound to pay the customer 3 percent interest per day with Kibor to the customer. Profit visited various dealerships of different brands of vehicles and, interestingly, all the popular vehicles in the market were either booked off or asked to wait four to eight months. Vehicles were booked on certain days of the month at Suzuki Shalimar Motors in Lahore whereas booking of the new Civic was stopped by Honda’s dealership in Township while the delivery time for the said vehicle was eight months. However, for the 1500cc and 1200cc variants of the Honda City, the time of delivery was to be four months. Similarly, Babar Abbas, sales manager of Toyota’s dealership on Walton Road, informed
