Car prices and delivery periods

This refers to the letters written by Captain (Retd) Ghulam Shabir and Mumtaz Piracha that have appeared in newspaper (January 12, 2005) on the issue of car prices and their delivery periods. As an industry analyst i would like to share my views on the subject. Car demand has risen exponentially in the last 2 years mainly due to good macroeconomic management and sharp decrease in interest rates.
This sudden upsurge was not anticipated by the car manufacturers, thus creating a supply-demand gap as increase in production capacity requires heavy investment and technology transfer.
Taking advantage of this gap between supply and demand, some investors and resellers of cars started booking more than one car for sale at "premium" to those customers who were not willing to wait for the delivery. This further aggravated the situation.
The situation now is that all manufactures are on a crash programme to increase capacities. In the last 2 years Pak Suzuki has increased its production capacity from 50,000 to 90,000. Indus Motor has increased its capacity from 18.000 to 37,000.
Honda has increased it capacity from 1,50,00 to 30,000. Dewan Motors has also announced plans to go double shift and increase the capacity later.
Although the GoP has recently liberalised import of new and used cars, the situation has still not changed much as even prices of imported cars have been increased and premiums are being charged on them (eg Mitsubishi).
Similarly car manufactures are taking measures to discourage non- genuine customers. One company, in particular, has taken several measures.
THESE INCLUDE:
-- Detailed scrutiny of booking forms, customer details and copies of NIC
-- Only one vehicle against one NIC
-- Only new NIC is accepted
-- NTN number, bills, etc to match NIC address as secondary evidence
-- Compulsory registration in the name of NIC holder
-- Payment draft must carry name of NIC holder
-- Mystery buyer surveys
The automobile industry has given several suggestions to the government .These include development of a long term and consistent auto policy to further encourage investment in this sector so that production capacities can increase which is the only long term solution to delivery problems and premiums.
Also a legal framework and its transparent administration has to be provided by the GoP to stop middlemen from reselling cars.
The car manufacturers, government of Pakistan and the consumers are all stakeholders of the automobile industry of Pakistan as it is a major source of revenue, employment, investment, import substitution and technology transfer.
The need is for all the stakeholders to realise their responsibility and fulfill it.
The car manufacturers on their part should make further expansion in capacities, the government should provide a conducive business environment and long term stable policies, and the consumers should insist on buying cars only at the official retail sales prices announced by the manufacturers.
If all stakeholders make a concerted effort there is no reason why locally manufactured cars matching global quality standards cannot be available to consumers at competitive prices without long delivery periods.