KARACHI, Nov 20: The local auto assemblers have no immediate plans to cut prices to boost the demand for cars and other vehicles despite suffering from steep fall in sales during the last six months.

There has been a drastic cut in steel prices worldwide and Pakistan Steel has already reduced rates of its products. However, the assemblers appear to be in no hurry to pass on the benefit of reduced steel prices to the car buyers.

“The car makers have already made a clever move by substantially pushing up the prices in the last few months on the plea of rising steel prices, yen appreciation against the rupee and increase in power rates,” said a market watcher.

“In case the assemblers reduce prices now it will be an eye-wash as the reduction will only be in the recent increase which has already been implemented, observe people related to auto industry.

A leading assembler, who asked not to be named, ruled out any price cut by saying that the industry has procured the parts and accessories (either imported or locally made) at higher rates.

He said if the prices of steel products had been falling for the last one or two months then its impact on car prices would be reflected in next three months. So far only Indus Motor Company (IMC), in collaboration with Habib Bank Limited, has tried to lure buyers by reducing monthly installments to Rs22,800 on booking of new Toyota Corolla from Rs30,000 and for Cuore’s to Rs10,300 from Rs15,500. The company will deliver the vehicle before Eidul Azha.

However, an Indus Motor official said that there were remote chances of any price cut. The official said that so far the company had not undertaken any human resource downsizing, but “it is taking various cost-cutting measures.”

Some assemblers have started cutting their workforce. Vendors have already eliminated 50,000 jobs amid falling orders from the assemblers.

Meanwhile, a car vendor said when everything was ready to meet Adviser to the Prime Minister on Finance Shaukat Tarin this weekend but an afternoon call from Islamabad on Thursday about cancellation of the meeting had tarnished the hopes of the vendor industry.

The vendor industry and the representatives of Pakistan Automotive Manufacturers Association (PAMA) were jointly invited by Mr Tarin to discuss the problems of the ailing auto sector.

He added that the official from Islamabad had not given any new date of meeting with the adviser. However, some PAMA officials are reportedly meeting with Secretary Industries on Friday.

On car price cut, he said that the impact of the steel prices should be passed to the buyers but the yen was still going high against the dollar and its impact would not be reflected in car prices.

An assembler said that there were other reasons that were hampering sales of locally-made cars. He said some customers were waiting for January owing to change of year and model of purchase.

Besides the car financing through banks and leasing companies had almost come to a standstill, which used to be over 70 per cent of the total car sales when industry was enjoying a festive season, he said and added that the two per cent increase in interest rates would further impact sales.

Director Research JS Research Mohammad Sohail was of the view that the car prices may come down in the next three to six months provided that the steel prices in world markets maintain the downward journey.

He said that the Japanese currency had still been appreciating making CKD imports costlier for the car makers. The decrease of around Rs20 per litre in petrol price in the last few months was unlikely to entice prospective buyers of cars as the surging food inflation had already hit their purchasing power badly.

According to JS Report, in July-September 2008, Pak Suzuki, Honda Atlas, Dewan Farooqui Motors and Indus Motors saw a massive decline in their profitability thus showing a loss of Rs342 million compared to Rs1,440 million in July-September 2007.

The sales of cars and LCVs declined by 37 per cent to 40,474 units in July-October 2008 as compared to 63,765 units in the same period of 2007. In cars only the sale dropped by 44 per cent to 28,665 units in July-October 2008 as compared to 51,454 units in corresponding period of 2007.