Car prices in Pakistan have recently seen significant reductions, with several manufacturers announcing substantial cuts. Kia led the trend with a reduction of over Rs. 15 lac for its Stonic model, followed by Peugeot 2008 with a Rs. 4.5 lac decrease, and Suzuki Swift with a Rs. 7.1 lac drop. These cuts, rare in Pakistan’s automotive industry, have sparked curiosity about the underlying reasons.
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Economist Ali Khizer offered insights into the factors influencing these adjustments. The revised prices represent significant reductions, with Stonic’s price slashed by 24%, Swift’s by 13%, and Yaris 1.3 CVT and City CVT by 3% each.
One of the primary drivers behind the price drops is the implementation of revised Goods and Services Tax (GST) regulations. The new price range for cars now falls between Rs. 4.69 million and Rs. 4.77 million, down from the previous range of Rs. 4.83 million to Rs. 6.28 million, reflecting the profound impact of the 25% GST on cars.
Khizer explained that regulatory changes in March 2023, which raised the GST on cars with engine capacities of 1400cc and above to 25% from the previous 18%, affected Stonic’s price significantly.
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In March 2024, the government introduced further changes, imposing a 25% GST on all cars with ex-GST prices exceeding Rs. 4 million. In response, Toyota and Honda reduced their prices to keep their variants below the Rs. 4 million threshold. Kia and Suzuki followed suit by strategically reducing the prices of Stonic and Swift to align with the revised GST regulations.
While regulatory changes primarily drove the price reductions, consumers benefit from more affordable pricing. The competitive landscape in the automotive market is also evolving, with speculation about potential price adjustments from Toyota and Honda to remain competitive with Suzuki and Kia.
