Fahad Ahmed, a businessman, wanted to buy a new vehicle, and instantly faced two options – pay ‘own-money’ for prompt possession or wait four months.
He chose to go the route officially advised by most auto-sector companies.
A few months later, Ahmed rued his luck as the delivery time stretched beyond 180 days, but the ordeal was not over.
He ended up paying a higher amount because the vehicle’s price increased — in fact, he ended up paying more than what he would have as ‘own money’.
Customers shopping in Pakistan’s auto sector are often faced with such a situation.
Amid massive rupee-volatility, car prices inevitably remain under pressure. Due to lack of localisation to the extent government wanted, car prices remain subject to the exchange-rate, swinging wildly upwards if rupee starts to depreciate.
Ahmed’s situation also brings to light another issue — delivery times.
Back in 2016, when the then-government introduced the auto policy, its reasoning for offering new players incentives was to increase competition, make a wider array of choices available to the consumer, and reduce lead time.
Fast-forward to 2022, delivery times are nowhere near where desired.
Business Recorder looks at the various car brands, and the unofficial delivery times being quoted to customers in Karachi.
A dealer at KIA confirmed to Business Recorder that there is a 10-month delivery time being quoted for its Picanto variant in Karachi. Its booking has remained suspended for a few months.
KIA’s crossover SUV Sportage has a six-month delivery lag, while mini-SUV Stonic and mid-size SUV Sorento are readily present, the salesperson added.
A sales manager at Honda Cars dealership said delivery time for its high-end Civic is presently at 10 months. City’s 1.2 and City 1.5 Aspire (automatic) are expected to be delivered after four months, while City’s 1.5 standard variant and BR-V’s delivery period is one month.
The salesperson said that Civic’s prompt delivery costs (read own-money) Rs600,000 while for the City the amount stands at Rs150,000.
Research analyst at Ismail Iqbal Securities Muqeet Naeem, who covers the auto sector, said car buyers were also facing delays with Suzuki. Alto variants’ delivery periods have increased to six months, while Wagon R has a three-month delivery lag.
There is also a three-month delivery period for Cultus variants, but it has been suspended for the last 10 days, according to a Suzuki dealership.
Around Rs150,000 to Rs200,000 own-money is being charged on Suzuki hatchbacks.
Toyota (Indus Motor Company)
A car dealer said own-money of Rs600,000 existed for Toyota Corolla vehicles, especially Grande.
Delivery period for the car is at nearly eight months. Toyota Yaris takes up to three months to be delivered and own-money is being charged up to Rs300,000.
A company official said that its SUV Oshan X7’s delivery time is at seven months. Alsvin Lumiere is available with a lag of one month, while its manual edition would be delivered in September — a three-month lag.
Meanwhile, information gathered from dealerships in Karachi suggests Hyundai Tucson’s delivery time is at three months. A few weeks ago, its delivery time was at one month.
Hyundai Elantra variants' delivery time is also now at three months.
Sonata 2.5L delivery period is at one month, while the 2.0L variant is slated for delivery after two months.
Naeem said the market is expecting delivery periods to reduce after the State Bank of Pakistan (SBP) introduced demand-curbing restrictions on auto financing. Increasing car prices due to rupee depreciation will also add towards reducing demand.
How OEMs are looking to curb the own-money issue
Indus Motor Company (IMC) CEO Ali Asghar Jamali says the government’s restriction to collect a maximum of 20% on booking makes a business case for investors.
Investors can book five cars at a price of one, which chokes supply and increases delivery time, giving margin to investors to charge high own-money, he said.
Jamali says if car companies are allowed to charge full payment at the time of booking it would make the industry unattractive for investors.
Government can then penalise assemblers if they do not deliver a car in three months.
Another official said present-day circumstances – wildly fluctuating exchange rates and international commodity prices – would continue to keep ‘investors’ relevant.
The official said investors would still be booking cars at full price anticipating a price increase.
“However, if the government allows companies to take full payment, with the added clause of charging higher prices if rates increase, then investors will be eliminated,” the official added.