Auto industry fears massive drop in sales
KARACHI: Auto industry players forecast 30% drop in sales in 2022-23 given uncertainty after increase in withholding tax on filers and non-filers, imposition of a 1% capital value tax on vehicles over 1300cc, strict auto financing rules to compress demand, high interest rates and other price shocks to be expected.
Speaking to Dawn, market sources said assemblers are also scrambling to pass on the impact of the continued devaluation of the rupee against the dollar and high ocean freight rates in the form of price hikes for vehicles after Eidul Azha, with many pointing out that the industry is going through a crisis.
Indus Motor Company (IMC) has already closed advance reservation of vehicles from May 18, followed by Lucky Motor Corporation Limited (LMCL) from May 20 on Picanto Automatic and Sportage and Pak Suzuki Motor Company Limited (PSMCL ) from July 1.
These decisions were taken by the assemblers due to the impending foreign exchange crisis and the decision of the SBP to prohibit the opening of letters of credit (LC) for the import of parts and accessories from May 20, 2022. .
New taxes, car financing restrictions and soaring fuel prices have buyers worried
Speaking to Dawn, IMC CEO Ali Asghar Jamali predicts at least a 30% drop in vehicle sales in FY23 due to rising fuel prices, SBP restrictions on the opening of LC for auto parts and new taxes imposed from July 1st.
On the chances of a price increase after Eid, Mr. Jamali said, “We need to raise the prices. Nope [other] choice.”
According to auto industry insiders, the impact of rising various taxes, soaring interest rates, vehicle prices, high gasoline and diesel prices, LC restrictions and the reduction in consumer finance duration will be visible in September 2022 vehicle sales data as assemblers are currently bullish on thousands of advance reservation orders for cars, jeeps, SUVs and vans passed a few months ago and which would be delivered in the coming months.
About 26% of IMC’s total sales come from auto finance, while consumer finance’s share of Pak Suzuki’s total sales is 35%.
Fearing a 25-30% drop in sales in FY23, a Korean vehicle assembler said the company had not raised prices for Kia vehicles. Some changes have emerged after the finance law regarding the implementation of the 1pc CVT on vehicles over 1300cc from July 1. As a result, two Kia Stonic models now have 1pc CVT for Rs44,250-47,250, three Sportage models for Rs53,000-64,990 and three Sorento models for Rs68,360-74,990.
According to Honda Atlas Cars Limited (HACL), the 1pc CVT on the City 1.5 ranges between Rs35,890-38,990 while on two modes of the Honda BR-V, the CVT hovers between Rs42,490-42,740. The 1pc CVT on six Honda Civic models costs between Rs55,490-66,740.
Regarding the withholding tax on filers and non-filers, the HACL official said there is no change in the WHT on filers in the Honda product line. However, 75,000 rupees are charged to non-filers when purchasing the Honda City 1200cc, which was 50,000 rupees. For the 1,301,600cc version, the rate of non-declarants is Rs150,000 instead of Rs100,000.
PSMCL has informed its authorized dealers to charge Rs 10,000 for Alto (all variants), Bolan and Ravi to registrants at Rs 7,500 while non-registrants will pay Rs 30,000 instead of Rs 15,000 on the same models .
Registrants interested in buying a WagonR or Cultus (all variants) will have to pay Rs 20,000 instead of Rs 15,000, while Swift buyers will pay Rs 25,000.
Non-filers of Wagon R and Cultus will have to deposit Rs60,000 instead of Rs30,000, while a non-filer will make a payment of Rs75,000 instead of Rs50,000.
A Sindh excise and taxation official, who asked not to be named, said motor vehicle registration fees were the same for the past two years, but the WHT rate on filers and non-filers and the CVT had been increased from July 1.
Engine registration fee payable at time of registration for cars/jeeps not exceeding 1,000cc is 1pc of vehicle value, followed by 1.25pc on vehicles 1,000-1,300 cc, 2.25 cc on vehicles 1301-2500 cc and 5 cc on cars/jeeps over 2500 cc.
A private bank employee specializing in auto leasing said: “Auto finance goals are difficult due to limited customer demands.
Automobile Manufacturers Association of Pakistan member car sales soared to 210,633 in 11MFY22 from 139,613 units in the same period last year. Sales of LCVs, vans and jeeps fell from 45,891 units to 40,255.
Posted in Dawn, July 10, 2022