The upcoming auto industry development plan may face a lukewarm response from foreign investors, following the liberal policy on import of used cars, auto experts said here Friday. They said the policymakers had appeared indistinct on the auto industry development plan as the government on one hand wanted to attract European car makers to attract investment in local market and on the other, liberal import of used cars, exploiting baggage and gift schemes, was denting the local industry and the exchequer.
According to the annual records of used cars imports between January and December 2015, around 34,765 passenger cars were imported including 25,000 small cars, 4,036 SUVs and 2,456 pickup/vans. The total imports of used vehicles last year were 41,257 units.
Almost 5,000 units of Hybrids competing with Civic and Grande were imported in 2015, while over 4,000 SUVs were imported affecting the locally produced Fortuner, of which around 700 units were sold during the said period. The experts are of the view that used cars are only beneficial for traders who charge premium on cars imported before the levy of 1 percent duty, urging the government to change the mindset where automotive manufacturing is discouraged and trade is encouraged due to which not only industry is being hurt but consumers are at the losing end due to higher prices, non availability of spares, after sales service and technical support.
The three segments of domestic auto industry namely small cars and minivans, high-end sedans, and SUVs are being hurt by the misuse of concessionary schemes of importing used cars meant solely to facilitate overseas Pakistanis. "Availability of this market to local industry would have enabled the company to utilise its capacity and to develop confidence to make future investments in capacity creation and new models introduction," said former chairman PAAPAM Aamir Allahwala.
'The government should be aware of the damage being caused to prospects of foreign investment, labour associated with local and allied industries and investment made by producers and vendors,' said Aamir, adding that in 2015 the domestic auto sector has led the LSM growth in the country and therefore needs to be encouraged. He said the industry requests the government to increase applicable duty by 20 percent on the import of small cars, below 1000cc, as these cars are under-taxed.
"The government should reduce age limit from 5 years to 3 years for minivans, and increase applicable duty by 20 percent on the import of minivans, below 1000cc, as these cars are under-taxed," he said. Similarly, the government should reduce the duty rebate from 50 per cent to 0 per cent on the import of Hybrid vehicles considering that drop in oil prices which has eliminated the need to encourage hybrids.
Moreover, the government should reduce the allowable age limit from 5 years to 3 years for SUVs. "These measures will increase market penetration and capacity utilisation, as is the case in the HCV sector, which is going through unprecedented growth as a result of measures to control the import of used HCVs," Aamir added.
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