The Engineering Development Board (EDB) has accused local car assemblers of raking in unreasonable profits from advance full payments typically deposited three to six months before delivery of a car. In a press release issued here on Monday by EDB, local car assemblers were accused of once again raising their voice against imports as a major factor, eating into the small Pakistani car market.
This may be a response to a recent interview of a local car manufacturer who opposed import of five years used cars on the premise that it would destroy the local auto sector. The EDB has argued that the three Japanese car assemblers, who share a market of 130,000 cars among them, regularly blame low volumes as main stumbling block impeding further indigenisation of critical parts and their efforts to give relief to the helpless consumers by way of rationalising cars' prices.
Referring to the present system of sale, the press release said that a buyer deposits full amount for the car in a company's account (inclusive of all taxes, duties, levies and the duties to be paid for import of CKD) at the time of booking, but he is made to wait for three to six months to get a new car. Statistics, supposed to be available with the OEMs, indicate an increasing number of buyers waiting in line to get their cars on priority, but they usually end up paying a premium called 'on money', ranging from Rs 30,000 to 100,000, to the dealers.
"If such is the demand position of cars in Pakistan, then why are the car assemblers making the buyers wait for such long periods, leaving them with no choice but to purchase imported cars?" EDB spokesman asked. This is despite the fact that sufficient capacities exist with the OEMs to cater to consumer needs within a more appropriate time frame.
The spokesman added that a careful look at the profits of OEMs would show a sizable amount, that fattens their account books, comes from interest income. This profit is generated, and probably invested by the OEMs, from the money of helpless buyers who are made to wait for months for their cars to be delivered.
"Having low volumes means non-viability of indigenising critical parts thus making transfer of technology a far cry, paving the way for import of CKD and parts, thereby enabling vendor industries of the exporting countries to flourish and making huge dent on the ability of local vendor industries to indigenise and grow," he maintained.
Analysing the situation he described that another factor hurting Pakistan's auto sector in general and the vendor industry in particular is that cars declared unfit in Japan, coupled with cut and welded vehicles (scrapped), find their way into Pakistan's market thus making it a junk yard of unwanted and environmentally hazardous vehicles.
According to the spokesman, it is essential that these vehicles are scrapped and not allowed to be exported to a country like Pakistan where its budding vendor industry is already bearing the brunt of low volumes. Pakistan government has allowed import of used cars up to five year old only under the gift and baggage transfer schemes in a bid to make cheaper cars available to some extent.
The spokesman said that instead of visualising the energy situation in Pakistan and defining a roadmap for developing fuel-efficient cars for consumers, the world renowned OEMs operating in Pakistan resorted to CNG fitted cars, which actually are not technically designed for CNG, in the first place, thereby making the already expensive cars costlier by at least Rs 60,000 for the consumers and making the engines of their cars prone to rapid deterioration.
He said that Pakistan's automobiles market has great potential to grow by all counts, only if the OEMs wholeheartedly strive to make cost-effective and fuel-efficient cars for a growing middle class segment. The OEMs should sense the pulse of Pakistan's market by offering different variants and the right of choice to the consumers, otherwise the market forces would not wait for too long to take their own natural course. To complicate matters and fuel rumours of promoting policies that favour a select few is the fact that EDB's Chief Executive Officer, Aitzaz Niazi, owns a car showroom in Islamabad and is a key supporter of five-year used car imports.
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