Monday, February 26, 2024

Depreciating Rupee, the Pandemic and the Automotive Industry

The Pakistani Rupee has shed approx. 60% of its value against US Dollar within 4 years. On a macro level it has adversely impacted current account deficit by making imports expensive. Additionally, increase in prices of global commodities further aggravated the situation. On a micro level; the Pak Rupee depreciation reduced the purchasing power of average citizen resulting in inflation.

The depreciation of the rupee along with the pandemic and its effects has deeply impacted the automotive industry in Pakistan as well

Car consumers in Pakistan are facing delays in delivery, hikes in prices, and also witnessed temporary non- availability of some car versions. There are multiple reasons why this is happening in Pakistan. Two major reasons are the pandemic and the devaluation of the Rupee.

The pandemic hit the world hard. Manufacturing hubs of all kinds had to be shut down, and industries had to close for days due to the uncertainty of the pandemic. This resulted in a halt in imports of parts, raw materials, and electronics for the automotive industry. And even when countries re-opened their borders, the short supply of materials meant the price went up, along with the increase in shipping costs which meant that car manufacturers in Pakistan were absorbing these shocks.

One can see that after all these events, it’s not unlikely that there be a delay in vehicle delivery times or increase in prices due to rising costs.There are still companies that are endeavoring that the some impact of car delivery delays and rising prices is minimized to customer.

One such precedent is set by Suzuki Pakistan; as in past as well as in recent revision in prices of cars; the company is absorbing a huge impact of cost and not charging price differential on all previously booked orders from customers which is a positive approach. At same time; Pak Suzuki is also complying to Government policy in ensuring that for vehicle delivery exceeding 60 days; customers are paid (Kibor +3%) compensation. This customer-centric approach is just one of the few reasons why companies like Suzuki have such a strong foothold in the Pakistani market.

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