CCP lists factors behind increase in vehicles' prices

The Competition Commission of Pakistan (CCP) has termed fluctuation in dollar-rupee parity and additional taxation as major factors behind increase in the prices of locally manufactured vehicles in the country.

According to the latest CCP presentation on auto sector, different factors are responsible for price increase in auto sector included (i) fluctuations in dollar-rupee parity which resulted in increased price of imported parts (CKD units) and increased price of imported raw material for the localized parts, (ii) imposition of Federal Exercise Duty in the budget (2.5 percent to 7.5 percent) and additional customs duty (ACD)/import stage tax (IST); (iii) and face uplifts/modifications resulted in price increase.

The CCP stated that on April 10, 2015, it issued an order against Pakistan Automobile Assemblers Dealer Association (PAMADA) and imposed a penalty of Rs 140 million for cartelization in the market of body repairs, paint jobs, genuine automobile spare parts and trained staff.

In April 2018, the CCP conducted open hearing of all stakeholders and issued an opinion. Recommendations of the opinions are: there should be no price change after booking of vehicle and there should be a supply push based model instead of a demand pull model to eradicate the practice on "on";(ii) creation of a national automotive sector regulatory ensuring standard, quality and safety and the redressal of complaints and imposition of penalty (KIBOR + 2%).

The recommendations also included measure to support automotive parts vendors, enhancing competition and supply through new entry and consistency in automotive policy.

On November 26, 2018, the CCP initiated a formal enquiry. The enquiry committee is conducting the fact-finding whether there is an unreasonable price increase in the automobile sector. The enquiry covered why the price of a car increases after booking on partial or full payment and why 'on' money is charged for an early delivery of vehicle.