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The car prices, in the last couple of days, have seen massive drops as Kia announced a reduction of over Rs. 15 lacs for Stonic, followed by Rs. 4.5 lacs for Peugeot 2008, and then it was Suzuki Swift with Rs. 7.1 decrease, an interesting development. Price reduction is a rare occurrence in Pakistan, and the current type of decrease happens once in a blue moon, so the question arises: why have car companies taken these steps and revised the prices of their vehicles? Let’s dig in. Famous economist Ali Khizer is here to help you understand this new trend. 

For reference, Stonic’s price is reduced by 24%, Swift’s by 13%, Yaris 1.3 CVT, and City CVT by 3%, respectively. 

New GST & Car Prices 

Noting the current trend, Ali Khizer pointed out that after price reductions, the new rates range between Rs. 4.69 million and Rs. 4.77 million. It is important to remember that before the price revision, the range was between Rs. 4.83 million and Rs. 6.28 million, so this is a very noticeable revision. 

There is a reason for the new prices of all four cars mentioned above to remain below Rs. 4 million without GST. But why? The answer is simple: the 25% GST on cars. 

Ex-GST Prices

If you remember, back in March 2023, the government increased GST on 1400cc and above cars (including SUVs) to 25% from the previous 18%. “All these cars, except Stonic, remained unaffected as they are all under 1400cc and not SUVs. However, Stonic took the heat of the decision, and its price was increased. 

Now, in March of 2024, exactly one year, the government changed the regulation, implementing 25% GST on all cars with ex-GST prices above Rs. 4 million. Seeing this, Toyota and Honda reduced their car rates, taking the prices of their 1.3 and 1.2 top variants below Rs. 4 million to ensure their brackets remain under Rs. 4 million to avoid the new tax. 

Following this, Kia took a bold step and reduced the price of Stonic to enter this bracket of Rs. 4 million without GST, and now Suzuki has followed suit with the new price of Swift. So, all in all, the companies are trying to avoid the new GST slab, which somehow proved to be positive for the consumers. 

So, now the question remains: Will Toyota and Honda reduce prices further to stay competitive with Suzuki and Kia? Well, we will see in the coming days. 

What do you think about these huge drops in car prices this week? Please tell us in the comments section.