Pakistan targets automobile production of 300,000 in FY22

Minister for Industries and Production Khusro Bakhtiar said on Wednesday that the government is aiming to increase Pakistan's auto production to 300,000 per year, and policy initiatives including tax relief measures announced in the budget for the ongoing fiscal year will help achieve it.

Addressing the media in Islamabad, Bakhtiar stated that the new auto policy will be presented before the cabinet next month for approval. The previous auto policy is due to end this year.

He added that the notification for reduced tax rates and duties will be issued in a day or two, paving way for the price decrease of all vehicles.

“The total capacity of Pakistan’s auto sector stands at 415,000 cars per year," said Bakhtiar. "The production of each car involves five different jobs. As we enter the stabilization phase after economic contraction, we are focusing on growth."

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He said that Pakistan produced only 164,000 cars last year, but, through the implementation of the new auto policy, the government is targeting to push production to at least 300,000 units.

“For this, the biggest incentive was reduction in prices that would increase demand. Hence, the government decided to slash Federal Excise Duty (FED) and Additional Customs Duty on all vehicles, while sales tax for small (engine size up to 1,000cc) vehicles was also reduced."

In the Finance Bill 2021, the government has announced a cut in FED on all vehicles up to 3,000cc by 2.5%, while abolishing it on vehicles upto 1,000cc. The general sales tax has also been slashed to 12.5% from 17% for cars up to 1,000cc.

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The federal minister said that due to the reduction in taxes and duties, the prices of cars with engine capacity upto 650cc would reduce by Rs105,000, whereas the rates of 1,000cc cars would come down by Rs145,000.

Bakhtiar said that the increase in auto production would generate 300,000 additional jobs.

The minister added that 2.6 million motorcycles were manufactured in the country last fiscal year, and the current year target is to produce 3 million , which will help generate 75,000 additional jobs.

In order to facilitate first-time car buyers, the government has decided to curtail the upfront payment as well. "In the coming days, the process of auto lease will be eased further as well."

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The federal minister was of the view that in order to achieve sustainable economic growth, one needs to expand the country’s engineering and manufacturing base.

He said that in the upcoming auto policy, emphasis has been placed on localization. “Presently, in Pakistan, the rate of localisation as per value is 30-35% in the auto sector, which we want to enhance this year,” he said.

“The upcoming policy is focused on auto development and exports. This is being done in order to make this sector part of the global auto manufacturing market."

Under the policy, the manufacturer will be required to export a certain percentage of vehicles if they import them, added the minister.

"It will also be ensured that the customers get their vehicles in a timely manner. There will be a penalty if the customers are not provided with vehicles in sixty days’ time.

"Vehicles will be booked online, and every customer will know the manufacturing stage of their vehicle."

Focus on electric vehicles (EV)

Meanwhile, Bakhtiar said focus will also be to improve the quality of Pakistan's locally-produced vehicles, and its safety features.

He said the manufacturing of electric and hybrid vehicles will also be encouraged.

“The import duty on EVs has been slashed from 25% to 10%, allowing the entry of EVs in Pakistan,” he said.