SUNDAY NOVEMBER 18: Reduction in car prices: local car assemblers turn down government request

ISLAMABAD: Local car assemblers have turned down federal government's request for reduction in price of cars from Rs 50,000 to Rs 100,000 per car in lieu of lowering age limit of used imported cars to three years from five years. This is the crux of a meeting between the Secretary Industries, Shafqat Hussain Naghmi with the local car assemblers held on November 8, 2012.
Official documents exclusively obtained by Business Recorder which will be discussed in the ECC meeting scheduled to be held on November 20, 2012, under the chairmanship of Finance Minister, Dr Abdul Hafeez Shaikh, reveal that local assemblers have not even bothered to hear the viewpoint of Secretary Industries who was also aided by his brother-in-law, CEO, Engineering Development Board (EDB).
The ministry of industries initiated a summary for the ECC of the Cabinet last month proposing reduction in age limit of imported used cars from five to three years. The ECC considered the summary in its meeting on October 23, 2012 and constituted a committee headed by the Deputy Prime Minister/ Senior Minister for Industries and comprising Secretaries of Ministries of Commerce, Industries and Chairman Board of Revenue for examining the whole issue holistically and submit its recommendations to the ECC.
"Local auto assemblers have played havoc with the public and charged exorbitant prices prior to the government's decision to increase the age limit of imported used cars from three to five years under three different schemes," the sources quoted some ECC members as saying.
The ECC members argued that before the increase in the age limit of used cars from three to five years, the local industry was playing havoc with the public and charging exorbitant prices. They maintained that despite the decline in production and sales, the car industry earned record profits confirmed by the Securities and Exchange Commission Pakistan (SECP). They argued that a two-or three-month recession did not justify abrupt change in policy of imported cars.
A meeting of the committee was held under the chairmanship of Deputy Prime Minister on November 7, 2012 in the Prime Minister Secretariat. After detailed discussion, it was decided to recommend reduction in the age limit of import of used cars from five to three years, subject to a meeting with the assemblers to convince them to reduce the prices of locally manufactured cars in the range of Rs 50,000 to Rs 100,000 for different types of cars.
Subsequently, a meeting with the assemblers was held under the chairmanship of Secretary Industries on November 8, 2012 to discuss reduction in prices of locally manufacturers' vehicles by the assemblers. However, no agreement on the issue could be reached. The local assemblers maintained that the policy of allowing import of five year old cars had hurt the auto industry so badly that they were already running in loss and were unable to reduce the price of local cars.
The Ministry of Industries has proposed that the age limit of imported used cars under SRO.90 (1)2011 of February 8, 20111 may be reduced to three years from existing five years. The ECC was informed that under the existing policy, five-year-old used cars could be imported into Pakistan under various schemes. The life of used cars for import purposes was increased from three to five years with the approval of the ECC in its meeting held on November 4 last year. As a result, during 2011-12 a total of 56,973 used cars were imported, amounting to 37 per cent of local production, while during 2010-11, import of used cars was equal to five per cent of total production.