Controlling The Prices And Quality of Cars in Pakistan

Current Price Levels of cars in the economy:

As observed during these current times, prices in the automobile sector have skyrocketed, leaving consumers helpless and unable to afford most sedans. Most notably, the best-selling car of 2018, the Suzuki Mehran was then available for 7–8 lakhs, however, now it is available for upwards to 10 lakhs. This is a great example of how these prices are affecting the general population.

Steps To Control Increases In Price Levels:

The government must step in and establish a regulatory body to ensure that the consumers aren’t exploited by the automobile giants located in this oligopoly of a market. This regulatory power will not only possess influence over the price and appearance of the car but also over the safety features and components implemented in the automobiles produced. These improvements or restrictions upon all these aspects, raise costs for the producers as their products are now costlier to produce. This burden of increased costs are then passed onto the customers, who are faced with prices out of their buying power. However, in our current economy, rising inflation has led to the prices of these cars being higher than ever before. Cars once advertised as being made for families or produced for the sole purpose of undercutting the competition with their affordable prices, now have transcended from being a realistic option for customers to the same category as another dream much like a luxury sedan.

The Aftermath to Manufacturers:

These high prices and low sales led to these companies failing to make any profits and began to shut down their production plants as early as 2019, another new “milestone” achieved by Pakistan. The already low demand coupled with fewer units being made, created a “scarcity” and allowed the giant manufacturers to avail of another excuse in order to catapult prices, way beyond the means of ordinary citizens. A statistic that demonstrates 8/10 Pakistanis are stricken by poverty, is proof that these companies serve only a few members of our society, and losing this customer base is detrimental to their long-term success and survival. The auto sector of Pakistan is still developing and is merely another market still trying to grow and prosper. Being overruled by Toyota, Honda, and Suzuki, there has barely been any place for other producers to join and contribute. This lack of competition allows customers to have fewer choices and remain stuck with limited options in respect to price, the most they can do to reduce the cheapest option they can find is to buy it second hand.

Why a Regulatory Body is Required:

The alarming lack of competition has led to poor development and gives extra space and freedom to these pre-existing monopolies to exercise their “right” to charge buyers with unusually high prices, delay newer models from entering the market and limit the number of features and variants available to our market. Other countries, even such as India, not only possess stringent competition from the international market but also, domestic producers who challenge the market and force others to introduce newer models with awe-inspiring innovations to captivate the buyers and follow up with low prices. Exchange rates can be cited as a differentiator between prices, but no amount of currency depreciation can explain the vast differences between the prices available here and there, merely chalking it up to injustices imposed on us by these monopolistic tyrants. Increases in taxes on cars being imported, allows these manufacturers to increase their own prices aswell because any individual who can afford to import those vehicles is also financially able to purchase them and might even settle for a costlier sedan or SUV produced by either Toyota or Honda to reduce their own costs and adjust to the “cheaper” option easily available to them. This body implemented and set up by the government, must take all these factors into account and then begin to settle upon what decisions they must make, in order to ensure that the manufacturers halt their exploitation of their local customer base and reduce prices up to a point that is suitable for all the classes, that are able to afford either a brand new car or a used option. This current state, not only proves harmful for customers but also for producers. They lose out on all profits and face constant losses as employees are still present even if plants are shut down and units are stopped being produced. This poses a risk to the longevity and growth of these firms. Only if the current situation seemingly resolves itself, would foreign firms be enticed into setting up here with the aid of government initiatives. This new competitor could coerce these firms into giving up and finally begin to innovate and introduce newer models far more frequently.