ISLAMABAD – Honda City remains among top sedans in Pakistan and it is not staying below Rs5 million by chance. Behind price tag lies calculated strategy by Honda Atlas to keep sedan in lower tax bracket, protect buyer demand, and defend its market share, even if it means accepting less margins.
The auto giant revealed keeping Honda City priced below Rs5 million threshold to spare buyers from a steep tax increase, even as the strategy squeezes the company’s own profit margins.
The company officials said vehicles with an invoice price above Rs5 million attract 25% sales tax, compared with 18% for those priced below the limit. To prevent the City from entering the higher tax bracket, Honda has intentionally maintained its pricing below the threshold, preserving the model’s affordability in Pakistan’s price-sensitive market.
The decision carries significant weight for the automaker, as the Honda City contributes nearly 70% of HCAR’s total sales, making it the company’s biggest revenue-generating model and the backbone of its domestic business. However, the strategy has come at a cost.
The profitability remained under pressure throughout MY26 after higher import costs pushed up production expenses. The company linked increase to currency movements, saying fluctuations involving the Thai baht and the US dollar raised the cost of components imported from Thailand.
Instead of passing entire burden on to customers through higher prices, Honda absorbed a portion of the increased costs to ensure the City remained below the Rs. 5 million mark. While the move has helped protect sales volumes, it has narrowed the company’s margins at a time when manufacturing costs continue to climb.
The automaker further highlighted policy uncertainty surrounding hybrid vehicles. According to briefing, the government proposed increasing customs duty on selected hybrid vehicle components from 4% to 5%, although the measure has not yet been finalized.
It also added that the existing tariff structure remains intact, with non-localized CKD components attracting a 30% customs duty, while localized parts continue to face a 46% levy. Imported completely built-up (CBU) vehicles are subject to customs duties ranging from 30% to 50%, depending on engine size, in addition to a 4% Additional Customs Duty (ACD) and an 8% Regulatory Duty (RD) on applicable imported components.
Despite cost pressures and an evolving tax regime, Honda Atlas struck an optimistic tone on the industry’s outlook. The company expects Pakistan’s automobile sector to expand by around 25% year-on-year, driven by improving demand and a gradual market recovery.
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