Auto industry under pressure to increase price of products: experts

KARACHI: The local automotive industry is facing difficulties in bearing the cost of production as the prices of various type of raw materials have gone up by 27 to 67 percent in the last 13 months, causing a dramatic increase in the production cost of the vehicles.

According to the auto industry experts, increase in the prices of various raw materials had been putting pressure on the auto industry to raise prices.

However, the impact of the recent price hike in raw materials could only be avoided if the government takes tax relief measures for the industry.

They urged the government to reduce taxes on raw materials to avoid a negative impact on the auto industry’s growth rate in case of a further hike in vehicles’ prices.

Moreover, they said that the local manufacturing industry was striving to absorb the increasing cost of raw materials.

Still, the price hike in different products is likely to become inevitable shortly.

With an increase ranging from 27 percent to 68 percent in the price of rubber, steel, copper and aluminum in the last 13 months, the manufacturers worldwide are finding it hard to counter this blow right after the Covid-19-related recession, they said.

“The price of rubber, which is a key input for many industries including the tyre industry and many manufacturers who use rubber parts, has increased by more than 50% in just one year from 160 Japanese yen/kg in February 2020 to 242 Japanese yen/kg on February 1, 2021, and by March 12, it has reached 270 Japanese yen/kg, increasing by over 11.57 percent since February 1, 2021.

Similarly, the price of steel has witnessed a steep rise of 23 percent during the said period from 3407 Chinese yuan per ton to 4184 Chinese yuan per ton. It reached 4582 Chinese yuan per ton by March 12, depicting over 9.5 percent increase in over six weeks.

The price of copper is also on the rise, increasing from US$2.5/lbs to US$3.5/lbs during the said period.

Copper is trading at $4.11/lbs since March 12, showing an increase of 17.24 percent since February 1, 2021.

Moreover, the price of aluminum has also increased by 17.28 percent.

With the price of other inputs on the rise too, the manufacturers may have no other option but to increase the price of their products as they are unable to absorb the current increase in the cost of raw material, they said.

Therefore, there is a need for governmental support to steer through this recent crisis, they added.

Copyright Business Recorder, 2021