Toyota Yaris 2020
Toyota Yaris 2020

Main causes of high car and motorcycle prices in Pakistan

The Senate was informed on Tuesday that the prices of cars and motorcycles in Pakistan were higher than neighboring countries due to various factors, including the import of 60 percent parts, currency fluctuations, expensive freight costs, high business expenses, heavy taxes, and the impact of import policies.

Responding to a question of Bahramand Khan Tangi, Minister of State for Law and Justice Shahadat Awan cited various reasons which had impacted the overall pricing of automobiles in the market.

He stated that the country had achieved a significant milestone by locally manufacturing 95 percent of tractors and motorcycles. Moreover, motorcycles were now being exported to other markets.

He said the prices of cars in countries like India, especially of smaller ones, were lower as compared to Pakistan. This difference could be attributed to the large scale economy and lower taxes in India, making the overall cost of cars more competitive.

“The government refrains from implementing a price fixation policy for the auto sector. Instead, it aims to encourage industrial growth by fostering competition among local auto manufacturers, allowing market forces to determine the open market value in the automotive industry,” the minister added.

He said the government’s intention was clearly demonstrated in the Automotive Development Policy, 2016-2021, and the same principle was upheld in the Auto Industry Development and Export Policy, 2021-2026. “These policies place increased emphasis on the localization of parts, reflecting the government’s commitment to promoting domestic manufacturing and industrial development in the auto sector.”

In the past, he said, the country’s car market was dominated by three major players, resulting in a lack of competition and limited choices for consumers. “To address this issue and improve consumer welfare in terms of pricing, choice, and quality, the government took measures to attract new investors and create a competition in the local market. One of the key actions was lowering the threshold for new investment, encouraging new players to enter the market and diversify the automotive industry, thereby reducing the monopoly of existing key players. These policy measures aimed to foster a more competitive market environment and ultimately benefit consumers.”

Brands from Korea (KIA, Hyundai), China (Master Motors, United Motors, Sazgar Engineering, Regal Automobile), and Malaysia (Proton) began their operations in Pakistan, the minister added.

The success of ADP 2016-21, he said, prompted the government to approve the new Auto Industrial Development and Export Policy (AIDEP) 2021-26, which aimed to strengthen the auto sector further and provide significant support to the economy.

“AIDEP (2021-26) focuses on import substitution, export enhancement, and the generation of employment opportunities for the local workforce,” he added.

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