Input costs prompt auto assemblers to raise prices

KARACHI: Local car assemblers have increased auto prices by 5 per cent to 15 per cent in the last few days after reaching a consensus with various stakeholders and government bodies.

The price increase was overdue since the last few months, as the price of major cost components, i.e., steel increased by 30 per cent to 35 per cent in rupee terms.

Thus, assuming steel constitutes roughly around 50 per cent of the total cost, analysts believe the overall production costs have increased 14 per cent to 16 per cent over the last few months.

“Considering this price change, we believe that INDU and HCAR have partially offset cost pressures by raising prices in the range of 6 per cent to 7 per cent, while PSMC has already passed on [a] large share of the cost pressures by increasing prices of various models by 8 per cent to 15 per cent,” an analyst at Sherman Securities said.

“We believe that Indus Motor Company and Honda Cars will further jack up [the] prices, going forward, keeping in view the rising international steel prices and the rupee devaluation,” the analyst said.

“We may see further price hike by both these players over the next few weeks. Just to recall, due to a sharp increase in the international commodity prices and the rupee devaluation, investors were concerned over the earnings of the local auto assemblers, pushing the market capitalisation of these companies down 13 per cent in FY22 so far.”

The category-wise data shows that the highest price increase of 8 per cent to 15 per cent was seen in models below 1300cc category due to limited competition, while 5 per cent to 10 per cent rise was seen in the products above 1300cc.

Saroash Saleem at AKD Securities said that the assemblers increased the prices across-the-board in line with the depreciation of the rupee against the dollar in the first quarter of FY22; thereby, nullifying the impact of higher input costs.

“The increasing prices may also impact the volumes in the upcoming quarters. On the flipside, we expect the imported CBU sales to decrease due to the latest regulations of the SBP where the consumers can no longer purchase the imported vehicles on auto finance arrangements.”

Barring supply constraints in a few variants (below 1300cc category), delivery time for new booking is three to four months.