Rising CAD a big concern: Regulatory duty will be imposed on EVs, raised on other imported cars

ISLAMABAD: Worried with the sudden increase in Current Account Deficit (CAD), the government has decided to impose regulatory duty on electric vehicles and increase on other imported vehicles, well-informed sources told Business Recorder.

The decision was taken at a high-level meeting of Tariff Policy Board (TPB) presided over by Advisor to Prime Minister on Commerce Abdul Razak Dawood.

The meeting considered different proposals of Ministry of Industries and Production and NTC.

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The sources said the TPB has approved imposition of 25 percent Regulatory Duty on import of electric vehicles having more than 50 kWh battery pack against the EDB’s proposal of 50 per cent RD. Industries Ministry, in its paper, argued that due to decrease in Customs Duty on EVs in CBU condition from 25 per cent to 10 per cent, the import of high end EVs contributed to an increase in Current Account Deficit (CAD).

It further said that the purpose of EV Policy is to promote local manufacturing whereas import of high end EVs has increased due to reduction in customs duty. The imposition of RD will discourage import of high end EVs in CBU condition.

However, the Board has increased RD to 50 per cent from 15 per cent on Hybrid Vehicles (CBU) on vehicles of 1501 cc to 1800 cc. The purpose of this intervention is to discourage import of vehicles in CBU condition and improve CAD.

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The meeting also decided to increase RD on CBU import (normal gasoline vehicles of 1501-1800 cc).

Federal Excise Duty (FED) on locally manufactured cars/ SUVs from 1501 and above will be enhanced to 10 per cent from existing 5 per cent.

Such measures may result in a decline of this well performing sector. In addition the gap between imported and local vehicles will further increase providing more space to local manufacturers to further increase prices, well informed sources told this correspondent.

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In addition the tightening of financing by the State Bank will also have adverse impact on volumes of cars. This sector of economy is expected to go down resulting in adverse impact on part manufacturing as well which has just started to recover after COVID 19.

Copyright Business Recorder, 2021