The country’s auto part makers have asked the government to reduce taxes on the auto sector to boost localisation.
“The government should realise that its treatment of the auto industry as a cash cow by burdening it with taxes ranging between 37% and 43% per locally produced car is hampering the growth of the auto industry,” said Abdul Rehman Aizaz, chairman of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM).
He was speaking to the inauguration ceremony of the Pakistan Auto Show 2023 in Karachi on Friday.
Higher finance costs and massive increase in car prices also reduced consumer demand for cars.
In the first quarter of FY24, car sales in Pakistan stood at 20,983 units, down 40% as compared to the same period the previous year.
PAAPAM chairman said around 300 companies in Pakistan are manufacturing thousands of components for car manufacturers in the country, generating employment and contributing to the industrial output of the country.
“Majority of low-tech components and certain hi-tech components of this segment are made in Pakistan,” he said, “However, it doesn’t mean that the localisation goal is near completion like in motorcycle and tractor segments due to various reasons, including low volumes, certain non-tariff barriers, and reluctance in the transfer of technology by international companies.”
Aizaz said car consumption per capita in Pakistan is quite low even if compared with regional underdeveloped countries.
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“PAAPAM believes that OEMs [original equipment manufacturers] shall give priority to the potential of the market we possess and work on lines of tripartite joint ventures among international part manufacturers, local OEMs, and auto part manufacturers of Pakistan,” he added.
PAAPAM chief said the automobile horizon is not limited to passenger cars and SUVS only.
“It also comprises sectors like motorcycles and tractors, where we are world competitive in terms of value provided to end customers.
“The main reason for competitiveness in these sectors is the 90% to 95% localisation we achieved in these sectors, contributing heavily to the GDP and the national exchequer,” he said.
Aizaz shared that complex and critical components of motorcycles are manufactured in Pakistan under technical assistance of Japanese companies, adding hi-tech components and assemblies from complete engine to suspension are completely locally manufactured.
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“The resultant good quality and competitive pricing are getting the acknowledgement not only from local but international customers also, as motorcycles are now being exported to various countries,” he said.
PAAPAM chairman claimed that Pakistan producer cheapest tractors in the world, even cheaper than India and China, due to the localisation of almost all engine, transmission and suspension parts.
Earlier, Zain Shariq, convener of Pakistan Auto Show 2023 said local parts manufacturers are not confined to auto parts only, as they are manufacturing parts for defence, aviation, and healthcare industries too.
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