Car sales are rising and driving up the premiums as they go. Known locally as “own money”, this is where buyers pay a little bit extra’ to dealers and investors for immediate delivery. This peculiar practice arises because original equipment manufacturers (OEMs) often delay deliveries by up to six months, depending on their supply chains, and production capacities, and perhaps even to restrict supply and create artificial scarcity.
There is no guarantee of price for consumers. If during the waiting period, OEMs raise the price or taxes go up, customers with pre-booked vehicles must pay the difference. To avoid this uncertainty and the hassle of securing additional funds, many buyers opt to pay “own money” upfront, over and above the price of the car, to secure immediate delivery. Given the speculative nature of these premiums, the size of the prevailing “own” could serve as a barometer for demand: the higher the “own,” the stronger the appetite for that model. As it stands, the current premium on Alto—arguably the most popular car in the market right now—stands at Rs160,000. But other cars with higher perceived popularity and/or are more expensive have higher premiums.
And people are paying for it. In 8MFY25, Alto sales have grown by 43 percent. Car showrooms are busier than last year, and Suzuki factories are churning out more Alto than any other model being assembled in the market by any OEM. For context, 42 percent of all assembled passenger cars are Altos; 31 percent of SUVs and LCVs are included in that country. If Suzuki had higher capacity or was producing vehicles at the pace with which it is demanded, there wouldn’t be an artificial black market of cash transactions carried out by investors and opportunists. According to a PIDE study, an estimated Rs150-170 billion was paid in “own money” through transactions made between 2018 and 2022, or Rs35 billion annually. In FY18, the three OEMs—Indus Motors, Pakistan Suzuki, and Honda—made less post-tax profits (Rs23 billion) than combined. The question is, why aren’t they not protesting against this artificial market?
While some OEMs like Suzuki struggle with profitability, the overall industry benefits from a system where shortages justify high premiums. The real winners remain investors, dealers, and assemblers who manipulate supply to keep their control over prices and market dynamics. The fact is, “own money” is not just a demand-side phenomenon, and is driven by many other factors. OEMs deliberately underproduce to create demand pressure. While producing at lower capacity, they are able to control pricing and maintain higher margins. The trajectory of Indus Motors here sheds more light. For one, the company has done remarkably well for itself, even during demand slowdown, by introducing the right mix of vehicles that perform best on the Pakistani roads. Between an affordable sedan, a string of high-performing sedans, and a full SUV that has carved its own market, Indus Motors’ offerings are fit for the Pakistani consumer.
Under the just-in-time supply chain model, the company first takes bookings and then places import orders for CKD. All the while, the cash advances from bookings are kept in interest-bearing accounts that rack up “other income”. This is a nifty investment as Indus Motors’s other income has expanded from 3 percent to 9 percent of revenue between 2015 and 2024. As a share of before-tax earnings, this is even higher—in FY23, 89 percent of the company’s earnings were coming from “other income”. In the time that Indus Motors “delivers” the vehicle, it is earning income on the pre-bookings.
This also means that when 3S dealers and investors make pre-bookings, multiple bookings at a time, it actually serves the OEMs financially, not detract from their business. Dealers provide a stable demand for OEMs with guaranteed sales. At the same time, when demand falls low, dealers and investors bear the market risk of holding unsold stocks; OEMs still make their money. In fact, even when demand is low, the delivery times do not shorten. The reason is, that OEMs simply reduce their production, continuing to work with the investors/dealers’ model, and indirectly legitimizing their operations.
Even though this is a shadow practice, the only loser here is the consumer. Investors win by doing basically nothing. They pre-book vehicles to sell onward and create a controlled shortage, operating a market run on speculative trading. Some have argued that this illegitimate business is even more profitable than plot trading in Pakistan. The long delivery times that lead to the artificial shortage also justify future price hikes for OEMs. For regulators, it should make sense to curb their own money, as these transactions are not captured in official data; and are undocumented and untaxed.
In other economies, pricing is more transparent and documented where OEMs set the minimum price while dealers charge a service price to the consumer. Instead of speculative trading that only serves the traders, this leads to market competition where consumers can compare offers and negotiate deals.
The fact is, own money will disappear only if the demand-supply gap narrows and waiting times shrink. This requires OEMs to align production with actual market demand—but that doesn’t serve their interests. Regulators must intervene with substantive reforms: mandate transparent pricing, enforce strict delivery timelines, and impose meaningful penalties for delays. The current fines are ineffective. To eliminate artificially maintained shortages, controlled imports of new and used cars should be allowed, fostering competition and forcing OEMs to improve efficiency. Meanwhile, consumer protection laws must hold OEMs and dealers accountable for pricing transparency and delivery commitments, ensuring that the market works for consumers—not just investors and middlemen.
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