Automobile industry in hot water

Automobile industry
Automobile industry in hot water

KARACHI: The huge influx of used cars in Pakistan is not only hurting the local automobile industry but also causing substantial losses to the national exchequer on account of revenues and putting pressure on country’s foreign exchange reserves.

Experts have pointed out the government has lost almost Rs 16.5 billion due to import of 55,000 units of used cars and $371 million were spent on import of used cars during last year.The used car import policy is hurting severely the multi-billion local auto manufacturing and its vendor industry. The local auto manufacturing and vendor industry had invested billion of rupees with job opportunities provided to over 3.5 million workers while auto and vendor industries contribute over Rs 50 billion to the national exchequer.

Experts said all the countries in the world protect their local industry and policies are framed in their best interest.Unfortunately, in Pakistan the situation is very different and the policy makers intend to make the country a trading state instead of manufacturing one putting the billion of rupees investment on risk.They said the logic behind granting permission to import used cars was that the rates of locally manufactured cars are very high but the actual situation is very different and old used cars are being sold on much higher prices as compared to the similar brand of new cars being produced in the country.

In FY 2011-12, more than 55,000 vehicles arrived in Pakistan and this number is expected to go up in financial year 2012-13. During the year 2012, total new and used car market was around 230,000 units, which was previously closed at 164,000 units.If the volumes of used cars from both the current as well as last year are taken away, then there is almost no real growth in new cars volume over last year.They highlighted each local car contributes around 33 percent of its total price to the national kitty whereas government loses additional foreign exchange amounting to approximately $5,000 if it imports used cars rather than using a local car.

Quoting examples of other regional countries, they said there is no concept of duty depreciation in India and Thailand and same rate of custom duty is applicable for new and used vehicles.We should implement non tariff barriers as our neighboring countries have adopted which could be, registration of vehicle in importer’s name for one year, right hand drive, speedometer in kilometer per hour, importer to submit pre-shipment certificate for Ministry of Commerce.

They said if same situation persists then there would be massive layoffs, which could potentially create social unrest, which the government could not afford specially in an election year.This situation calls for immediate action on part of the government which needs to stop this influx of used cars by making appropriate changes in the upcoming trade policy, they added. – Dailytimes