Thursday, August 11, 2022

Investors reap ‘late delivery’ windfall as auto prices go through the roof – Business

KARACHI: Investors, who got delivery of their vehicles booked at old rates after a delay of months, are reaping windfall by selling their cars, jeeps and pickups at huge premiums due to massive hike in prices in recent weeks.

With the country on the verge of default, booking suspensions, massive price increases, restrictions on auto financing, and sales falling by 25-30 per cent in FY23 and non-production days, local assemblers have passed on the negative impact of a soaring dollar against the rupee to consumers.

The price gap between the old and new locally assembled vehicles now hovers between Rs590,000 and Rs3.12 million, while fear of more price hikes looms in case the rupee continues to crawl down against the dollar.

Read: Corolla, City and Fortuner — how expensive have cars gotten after latest price hike?

Due to the suspension of bookings by some big assemblers, the showrooms are now dealing with customers whose delivery time of vehicles has matured after a three-to-six-month long wait.

Market sources said the “on money” or price difference on Kia vehicles ranges between Rs1-1.3m.

For example, investors are demanding Rs7.6m for Sportage All-Wheel Drive (AWD) models, whose price has been increased to Rs7.250m from Rs6.363m.

Kia Picanto automatic booked at old prices of Rs2.312m and Rs2.7m in previous months is now pegged at Rs3.2mn. However, the buyer has to manage over Rs1m to get the instant delivery from the investor.

Kia Lucky Motor Limited and Hyundai Nishat Motors raised prices on various models by up to Rs1.1m.

Sources said a similar situation exists in Toyota vehicle prices as “premium” or difference the investors are charging between Rs500,000 and Rs2.5m on various models.

A Toyota dealer said investors are taking a big chunk from the consumer on those cars whose delivery is now lined up with old prices. “You either call this practice ‘on money’ or a big price disparity,” he added.

Indus Motor Company (IMC) has jacked prices by Rs590,000 to Rs3.12m followed by Honda Atlas Cars Limited (HACL) by Rs785,000-Rs1.450m.

A Japanese assembler car dealer said customers are getting the deliveries of their old vehicles booked six months ago, but they are waiting for the price to be settled in the market and then selling them.

A dealer said a premium of Rs100,000–150,000 exists on Honda City as the company has not suspended its booking yet, while booking of Toyota and Suzuki vehicles has been closed from May 18 to July 1.

He said “on money” on Suzuki Cultus and Alto660cc is around Rs500,000 as the company has not yet announced any price hike but old deliveries booked at low rates are being cleared.

A used car dealer said a number of people had parked their two to three-year-old cars and big vehicles waiting to make a jackpot at a certain time in view of the persistent increase in prices.

He said many people have pulled their money from their businesses and plunged into the auto business as investors due to the bullish trend in vehicle prices.

Sources said some deals of “on money” are stuck within the showrooms of the authorised dealers, despite tall claims by the assemblers that their showrooms’ staff are not involved in “on money” syndrome. Many deals are made outside the showrooms.

Dealers said the practice of “on-money” usually thrives due to long delays in delivery of vehicles ranging from two to 10 months.

Published in Dawn, July 31st, 2022


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