Pak Suzuki Motor Company (PSMC) has announced the launch date of its new car, Alto 660, the replacement of Mehran, as June 15, 2019 amid sharp economic slowdown in the country.
The Japanese automaker made the announcement through its official Facebook page. “No doubt, it’s a tough time as economic conditions are deteriorating day by day,” said auto industry analyst Faizul Sultan. “We are not certain where the rupee will find its floor. In this situation, the pricing of the new model will be a challenge for Suzuki,” he said.
Two weeks ago, the value of rupee against the dollar stood at 141, “which has now depreciated 7.7% to 151.92”, he said. Overall, the rupee has dropped more than 40% in the inter-bank market since December 2017.
“There is uncertainty about where the inter-bank rupee value will settle, which is why the price of Alto 660 will be a challenge for the auto company,” the analyst remarked.
According to market talk, the car price will be in the range of Rs800,000 to Rs1.2 million. Owing to the economic slowdown, the sale of cars and light commercial vehicles dipped 24% to 19,437 units in April 2019 against 25,567 units in the same month of 2018, according to latest data available with the Pakistan Automotive Manufacturers Association (Pama).
“Macroeconomic indicators are not good, so the company may not receive extraordinary success,” said Sultan.
New players like Kia Motors and Master Motors will also enter the market in coming months, therefore, the auto market landscape is changing fast. Although 57% of the 400 parts of Alto’ were manufactured in Pakistan, the car will be massively hit by the higher cost due to rupee depreciation.
The depreciation not only affects the cost of imported parts, but it also impacts the cost of parts produced locally because their raw material comes from abroad. Pakistan imports raw material for almost every part. The central bank has also increased the key interest rate by 150 basis points to 12.25%. Cumulatively, the rate has been increased by 650 basis points since January 2018 to date.
Therefore, car leasing is becoming more difficult day by day. Honda Atlas and PSMC rely on leasing as their customers mostly come from urban areas. The former reported a decrease of 38% in sales to 2,836 units in April 2019 whereas the latter recorded a 27% decline in sales to 10,789 units in the month.
Indus Motor Company registered a relatively lower decline of 7% as its sales contracted from 6,183 to 5,738 units because most of its buyers reside in rural areas and deal in cash.