The Pak Rupee made a significant recovery on Friday as the Dollar fell by Rs 4.4 to close at Rs 162.5 in the interbank market. This renders a 2.6% improvement compared to the low of Rs 166.88 a day earlier.
The gain came on the back of IMF’s approval for disbursement of US$1.386 billion to Pakistan to mitigate the economic setbacks caused by the coronavirus pandemic. The funds came under the Rapid Financing Instrument by the global financial body to help economies brace the impact of the COVID-19 distress.
Now the question is, will auto assemblers especially Indus Motor Company (IMC) which announced a rather unnecessary price increase a couple of days earlier, bring down the prices or at least revert the latest price increase? Unfortunately this has always been the case that auto assemblers never let go of a chance to revise the prices even in the slightest of variation in Rupee-Dollar parity. But when the Rupee appreciates, there is no reduction in prices whatsoever.
In fact, since June 2019 the Rupee regained its strength back and recovered by 6% to Rs 154 against a Dollar and stood stable for nearly 4 months there. Instead of reducing prices, local assemblers kept pushing up the car prices even further which was largely attributed towards dampening their declining profit margins. Then again on the eve of New Year 2020, car prices were given another substantial push even when there was no Rupee-Dollar depreciation as well as no additional duty or tax imposed by the government.
More interestingly the prices of newly launched Yaris were also revised across the range when the company is yet to deliver a single unit. And considering the fact that IMC is observing plant shutdowns due to COVID-19 lockdowns and is experiencing a disruption in supply chain as most plants in regional markets are already on a halt, and with no production in sight this never makes any sense to give a substantial push to prices when there is literally no one in the market to buy one.
Perhaps all we can do is to wait and see after this recent recovery of Rupee against the Dollar, whether car prices in Pakistan are going to come down or they will be pushed up even further.
Edit: As of the 27th of April, the Pak Rupee has recovered to Rs 159.37 against a Dollar rendering a 4.2% improvement, however we are yet to witness a price decrease in local assembled vehicles.