Cost of cars: Pak Suzuki Motor increases prices by 3%

Rates increased in the range of Rs20,000 to Rs30,000 for all car models. PHOTO: FILE

Rates increased in the range of Rs20,000 to Rs30,000 for all car models. PHOTO: FILE

KARACHI: Pak Suzuki Motor Company (PSMC) – Pakistan’s top carmaker by market share – has increased prices by 3% with effect from August 1, according to information shared by official dealers.

It translates into a price hike of between Rs20,000 and Rs30,000 on all its car models.

The company’s share price increased 3% on Monday, finishing at Rs413.5. The benchmark KSE 100-share Index went up 0.69% in a bullish day for investors.

This price increase is the first for 2016 that affects every model of the company. Earlier in the year, it had increased the price of Suzuki Wagon R by 2%.

When contacted by The Express Tribune via phone, PSMC spokesperson Shafiq Shaikh promised to respond in 10 minutes. However, he did not give his comments despite repeated phone calls. Analysts say the price increase will help PSMC maintain its margins. Owing to recent appreciation of the Japanese yen, which picked up pace in the wake of Brexit, the company’s margins in the first half of 2016 were 10% compared to 14% in 2015, according to a Topline Securities report.

Some analysts had expected the company to make an increase in car prices. “We had already assumed a price increase of 3% for the third quarter of 2016,” the report said.

It added PSMC would likely increase prices by another 2% during the remainder of the year. “We forecast that the company will maintain margins of around 10-11% during the second half of 2016.”

PSMC did not receive the support it wanted in the new auto policy. Moreover, the yen was appreciating due to which the company was resorting to the price increase, Sherman Securities analyst Sadiq Samin told The Express Tribune.

“A lot will depend on the volumes of the company because the Punjab taxi scheme is now over and it will have to bank solely on natural sales in coming months,” said Samin.

The price increase would not hurt sales of the company because there was no competition in the small car category in Pakistan, he added.

Last week, PSMC announced its second-quarter (Apr-Jun 2016) results and posted a profit of Rs488 million, down a massive 67% from Rs1.47 billion in the same quarter of previous year.

Sales fell 7% year-on-year (YoY) to Rs19 billion, which was mainly due to a drop in volumetric sales after the end of Apna Rozgar Taxi Scheme of the Punjab government. The company sold 26,011 units in the second quarter, a decline of 19% YoY.

Excluding taxi units (Ravi and Bolan), sales were robust as they increased 23% YoY to 16,911 units in the quarter.

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