Will car prices fall after US dollar adjustment in Pakistan?
Following the rise in US dollar rates in Pakistan, the country is suffering from high inflation. Gradually, everything increased in rate because of the direct or indirect link of commodity prices with the USD. Car prices have also increased.
Effects of rising car prices
Hyundai Elantra and Sonata price hike, KIA price hike and all the other big companies like Honda, Toyota and MG went up. The degradation of the US dollar has caused all these worse situations. This made buying vehicles impossible for the middle class because tariffs were high enough to make buying a car out of reach. A large part of the population belongs to the middle or lower class and considering the needs of the day, the car is a necessity.
Right now, the USD rate is falling, which increases the chances that car prices will also fall proportionally. The rise in the PKR rate is due to the release of IMF loans, reduction in imports, action by the State Bank of Pakistan against dollar hoarders, improvements in the Pakistan Stock Exchange (PSX). After all this, do you think car prices will go down?
How is the price of the car related to dollars?
Almost all cars are either imported from other countries. While some are assembled here, the components are dependent on imports from other countries. This heavy reliance makes the USD an important factor because as soon as the USD rate rises, the prices of components and cars skyrocket.
This is why our automotive industry has been deeply affected by this situation. However, the situation seems to be improving now if prices continue to fall.
Will the prices go down?
The USD’s dive from Rs. 250 to Rs. 224 sparked a spark of hope for car buyers and their confidence rose. However, customers are too quick to make this judgment. Because car prices don’t go down, they will stay the same.
Why?? Because cars are dollar-denominated assets that have an underlying dollar value. Ammar Khan, an economist tweeted: “Automakers have more than Rs. 180 billion in advances because cars have become a dollar-denominated asset. So no, the prices would not drop.
This indicates an increased demand for cars which manifests a simple economic concept that if the demand increases, the price does not seem to fall.