“Keeping in mind that the rise in forex [dollar rates] and its impact on CKD [Complete Knocked Down kits] and other parts, HACPL is compelled to extend the costs of Honda cars with effect from May 5,” the letter read.
Honda City (1.3 L, Automatic) will become Rs65,000 costlier and sell for Rs2,574,000. Its ex-factory price that doesn’t count other costs (withholding tax, freight, and insurance, etc) involved in bringing it on the road. Civic’s 1.5L Oriel variant will cost Rs4,349,000 after a rise of Rs100,000.
The letter says new prices are applicable on all bookings received from April 23 onwards. The present price (as on May 4) is applicable to old orders with full payment as on April 22, it said.
Deliveries for previous orders with partial payment as of April 22 are going to be made on the new prices. It said that the rates are supported by the present exchange rates and any hike may result in an extra increase also.
The market has been expecting the arrival of the new Honda City, which was expected somewhere between August and December before the Covid-19 contagion forced a state lockdown. Given the worth increase, the new City model goes to cost more even before its launch.
This decision comes three weeks after Indus Motor Company, the manufacturers of Toyota cars in Pakistan, raised its prices. Honda cited the rupee’s devaluation from Rs155 to a dollar to Rs167 because of the reason.
On March 27, the dollar rose to an all-time high of Rs169 before a financial institution intervention brought it right down to Rs167 an equivalent day. it’s been falling since.
Analysts say when the dollar becomes expensive, carmakers increase prices because they import up to 60% of their parts, which are purchased in dollars. However, Honda’s increase comes at a time when the dollar has fallen sharply. The greenback fell to Rs159.5 on April 22, then a one-month low, and has been staying at that level since then.
Car plants of all automakers are shut due to the lockdown and their inventories remain unsold. The sales of the auto sector plunged 70% this year compared to the corresponding period of 2019. within the case of Honda, the year-on-year decline in sales is 96%.
Both IMC and HACPL raised prices at a time when the economy is slipping into a recession because of the GDP growth forecast is negative 1.5% for the financial year ending June 2020.
Analysts say traditionally the automaker’s strategy has been to guard profitability. By raising prices, they struggle to stay profit margins normal in order that they can remain in profit.