Why has the car of a 'rich man' become cheap in Pakistan and the ride of a 'common man' has become expensive?

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   Ali1234 الباحث

   2025-07-14T00:49:07-07:00‫أضاف ‫‫إجابة يوم يوليو 14, 2025 في 12:49 am

   The perception that "a rich man's car has become cheap in Pakistan, and a common man's ride has become expensive" points to a complex interplay of economic factors, government policies, and market dynamics. While it might seem counterintuitive, there are several reasons why this situation can arise‫اقرأ المزيد

   The perception that “a rich man’s car has become cheap in Pakistan, and a common man’s ride has become expensive” points to a complex interplay of economic factors, government policies, and market dynamics. While it might seem counterintuitive, there are several reasons why this situation can arise in Pakistan:

   Why “Rich Man’s Cars” Might Seem Cheaper (or Less Affected by Price Hikes):

   1. Taxation Structures and Loopholes:
      • Tiered Import Duties: Historically, Pakistan’s import duties on cars have been highly tiered, with higher percentages for smaller engine capacities and lower percentages for larger, more luxurious vehicles. This was intended to discourage imports of smaller, mass-market cars to protect local assemblers, but it inadvertently made larger, more expensive cars relatively less burdened by import duties in comparison to their base price.
      • Specific SROs/Policies for Luxury Vehicles: There might be specific Statutory Regulatory Orders (SROs) or policies that offer concessions or different tax structures for certain high-value or specific types of luxury vehicles, especially if they are imported under specific schemes (e.g., diplomatic, personal baggage, or specific investor schemes).
      • Under-invoicing/Misdeclaration: While illegal, under-invoicing or misdeclaring the value of high-end imported vehicles is a known issue that can artificially lower the declared cost and thus the customs duties and taxes paid, making them “cheaper” for the end-user.
      • Resale Value and Investment: For the wealthy, luxury cars are often seen as an investment or a hedge against inflation. They retain their value (or even appreciate in some cases due to high demand and limited supply) better than the depreciating Pakistani Rupee. This means that while the sticker price might be high, the actual “cost” of ownership over time might be less for the rich due to strong resale.
   2. Dollar Exchange Rate Impact:
      • Devaluation of PKR: The continuous devaluation of the Pakistani Rupee against the US Dollar makes all imported goods, including car parts (for locally assembled cars) and completely built units (CBUs), more expensive in PKR terms. However, the impact on a car that already costs tens of millions of rupees might seem proportionally smaller to a rich buyer than the impact on a motorcycle that constitutes a much larger percentage of a common man’s income.
      • Forex Accessibility: Rich individuals often have easier access to foreign exchange or offshore accounts, allowing them to purchase imported vehicles directly or with less exposure to the volatile local currency market fluctuations.
   3. Market Dynamics for Luxury Segment:
      • Limited Supply, High Demand: The luxury car market in Pakistan is characterized by limited supply and high demand from a niche segment. This allows importers and dealers to maintain high-profit margins regardless of broader economic conditions.
      • “Own Money” (Premium): The practice of “own money” (paying a premium to get a car immediately instead of waiting for months) is prevalent for both luxury and common cars, but the sheer volume of “own money” on some luxury vehicles can be substantial, indicating a willingness to pay more, which paradoxically can drive up the actual price for those willing to pay the premium. However, if a particular policy shifts, it might reduce this premium for some models.
      • Tax Adjustments in Recent Budgets: There have been instances where budget policies have adjusted taxes on different engine capacities. For example, a recent budget (2025) might have introduced a new tax slab or removed an older one that previously disproportionately affected smaller vehicles, or perhaps even inadvertently eased the burden on some larger vehicles. The provided search result mentions “The company lowered huge amount (15lac approx) to come under the 4million to avoid 25% tax for above 4million vehicle,” which implies that manufacturers strategically adjust prices to fall into lower tax brackets, benefiting buyers of those specific models.

   Why “Common Man’s Rides” (Motorcycles, Public Transport) Have Become More Expensive:

   1. Fuel Price Hikes:
      • Primary Driver: This is arguably the biggest reason. Petrol prices in Pakistan have risen significantly due to international oil prices, currency devaluation, and government taxes. Motorcycles and public transport (buses, rickshaws) are heavily reliant on petrol/diesel, and these increased fuel costs are directly passed on to the consumer in the form of higher fares and running costs.
      • Inflationary Spiral: Increased fuel costs contribute to overall inflation, affecting the prices of spare parts, tires, and labor for maintenance of two-wheelers and public transport vehicles.
   2. Inflation and Devaluation:
      • Raw Material Costs: Even for locally assembled motorcycles, many components (e.g., engines, specialized electronics, some raw materials) are imported. The devaluation of the Rupee makes these imported parts more expensive, increasing the manufacturing cost.
      • Increased Production Costs: Higher electricity tariffs, wages, and other operational costs for local manufacturers of motorcycles also contribute to price hikes.
   3. Government Policies and Taxes on Local Industry:
      • Sales Tax and Other Duties: The government levies various taxes on locally manufactured or assembled vehicles, including sales tax. Any increase in these taxes directly impacts the ex-factory price of motorcycles.
      • Digital Presence Proceeds Tax Act: Recent budget measures, such as the 5% Digital Presence Proceeds Tax and an 18% sales tax on goods sold from abroad, affect online marketplaces like Temu and AliExpress, which are often used by common people for cheaper goods. While this doesn’t directly relate to motorcycles, it shows a trend of increasing taxes on common goods and services.
   4. Limited Public Transport Investment:
      • Underdevelopment: Pakistan’s public transport infrastructure has historically been underdeveloped and underfunded in many cities. This lack of efficient, affordable public transport forces a reliance on private motorcycles or costly rickshaws/taxis.
      • Private Sector Dominance: Much of the public transport sector is run by the private sector, which passes on all operational costs, including fuel and maintenance, directly to the passengers without significant government subsidies (unlike the electric bike subsidies recently announced, which are a new development).
   5. Lack of Competition (for Smaller Cars/Motorcycles):
      • While new players have entered the car market, the smaller car and motorcycle segments still have a limited number of major players, which can result in less competitive pricing compared to a truly open market.

   In summary, the situation is a consequence of Pakistan’s specific taxation policies (which sometimes inadvertently favor higher-end vehicles), the continuous devaluation of the Rupee, high fuel prices, and the general inflationary environment that disproportionately affects the cost of essential goods and services, including daily transport for the common man. The common man’s vehicle is a necessity, and its rising cost directly impacts their daily budget, whereas a luxury car, while expensive in absolute terms, might represent a smaller proportional burden or even an investment for the wealthy.

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