Historic cuts in car prices a ‘marketingstunt’ amid slow demand: experts

KARACHI: The recent historic cuts in prices of multiple car models were a “marketing stunt” by automakers in Pakistan, experts and dealers said on Friday, attributing it to slow demand in the South Asian country, Arab News reported.

Lucky Motor Company, which assembles KIA cars in Pakistan, reduced the price of KIA Stonic by as much as Rs1,500,000, followed by a cut in Swift price by up to Rs710,000.The rate cuts by Kia and Pak Suzuki Motors came on the heels of a reduction in prices of Toyota Yaris by Rs133,000 and Honda City by Rs140,000 respectively in March.

While KIA and Pak Suzuki Motors have said they received an “overwhelming” to the price drops, experts believe it to be a marketing stunt to help struggling models fare better in the Pakistani market.

“They (LMC) played a game because they had about 300-350 (KIA Stonic) cars lying dead which were not sold,” Hajji Muhammad Shahzad, chairman of All Pakistan Motor Dealers Association (APMDA), told Arab News.

“They threw [them] in the market and stopped the booking.”Shahzad said the price cut by the LMC generated interest among investors who booked the car instead of “genuine buyers,” noting that the car would come with around Rs500,000 own money as well.

Mashood Ali Khan, an auto industry expert, believed that price plays a key role in the auto sector, because of the current economic situation and prevailing high inflation. He said the LMC wanted to “test” the market.

“The people who have booked, maybe I am wrong, but I think they are mostly the investors,” Khan told Arab News. “It could not reach the end consumers as it was opened for two days.”Reached for comment, LMC Chief Executive Officer Muhammad Faisal said they corrected the KIA Stonic price to help it compete with sedan cars available in Pakistan and “took the hit” themselves, though the automaker didn’t anticipate the overwhelming response to the price cut.

“We tried to bring it to the price point at which competing sedans are available,” Faisal told Arab News. “When we brought it to this price point, the response from the market was unbelievable and better than our expectations.”

Though a Pak Suzuki Motor official did not respond to Arab News query about the cut in Swift price, the company said in a circular it had received an “overwhelming” response and was now introducing “stylish combinations” of a two-tone exterior.

Shahzad, however, said Swift did not get a “good response” despite the price cut. A decrease in car prices was already expected as the Pakistani government notified in March it would charge 25 percent sales tax on locally assembled cars, if their invoice price exceeded Rs4 million.Car sales declined in Pakistan by 38 percent during nine months of the current fiscal year, which began on July 1, amid a declining trend in auto financing, historic high interest rate, soaring prices and shrinking purchasing power of consumers, according to a research report by the Karachi-based Darson Securities.

Asked about the delivery of vehicles to customers, LMC CEO Faisal said the company had not delivered the newly booked Stonic cars and was still filtering buyers.“We have just made a commitment that we will deliver it now,” he told Arab News. “We have ensured that we will book one car per CNIC (computerized national identity card), we are filtering the investors, we are giving preference to genuine customers, so that we can deliver it soon.”

Faisal said the automaker was evaluating its stock position after the current response and it would resume bookings, however, the company would be giving delivery commitments for October onwards.

Car prices have increased in Pakistan by around 40 percent in the last two years and the costs of vehicles remain high despite the recent cuts, according to car dealers.Khan, the auto sector expert, called for localization of auto parts and a 10-year policy to promote auto industrialization to make affordable cars in Pakistan.