Locally-assembled cars: Government is responsible for increase in prices, admits Dawood

Advisor to Prime Minister on Commerce, Industries and Production, Abdul Razak Dawood on Thursday said that the government is responsible for increase in prices of locally assembled cars as in the last budget additional customs duty, excise duty, sales tax were increased in addition to withholding tax and Regulatory Duty (RD).

He was responding to a question raised by Senator Bahramand Khan Tangi in the Senate and referred to by the Chairman Senate to the committee for consideration in Senate Standing Committee on Industries and Production.

"We, the government increased the duties and taxes on cars not the manufacturers which is the main reason for the increase in prices," he added.

He said the local auto industry has achieved almost 70 per cent localization but made it clear that 100 per cent localization will never be achieved. He said the localization in tractor manufacturing which is a simple technology, is around 95 per cent.

Razak Dawood maintained that the main reasons for not achieving 100 per cent deletion is frequent change in models as everyone wants new model but in case of tractor, there is no change in models; he added that he does not like increase in car prices either and the main purpose of promotion of local manufacturing is to reduce prices.

M/s Suzuki has achieved 70 per cent localization, 65 per cent by Toyota and 58 per cent by Honda. However, the imported raw material used for parts makes them expensive.

Chairman Standing Committee, Senator Ahmed Khan cited the committee's recent visit to local assemblers in Karachi i.e. Toyata and Suzuki wherein the committee members saw a large number of ready units in the yard since a while because they do not have purchase orders.

Ministry of Industries and Production in its written brief, however, stated that the main reason for lack of demand is increase in additional levies and fear factor in customers due to its linkage to documentation of economy.

The committee was told that engine parts and some critical parts which require heavy investment and hi-tech parts are imported while other parts including structure, interior, exterior, suspension, brake system are being manufactured locally. It was also noted that the exchange rate, imposition of levies fall within the purview of Federal Board of Revenue.

However, Advisor on Commerce, Industries and Production appreciated the increase in sale of cars after months of decline.

"I called CEOs of two companies i.e. Toyota and Honda a few days ago who stated that after many months of decline, January was the first month when production of cars was up which is a very good sign," Dawood continued.

General Manager, Engineering Development Board, Mirza Nasir Baig informed the committee that there is no legal provision available with the Ministry of Industries and Production to control or fix prices of automobiles in the country.

Abdul Razak Dawood, said that whenever the top foreign principal of car assemblers visit Pakistan and hold meetings with him, he raises such questions but they answer that their experience is that when a country manufactures over 0.5 million cars prices are reduced. He said the biggest jolt to local auto industry was Yellow Cabs Scheme of the past.

After discussion, the committee decided to call the local assemblers and all other stakeholders concerned in the meeting for a briefing so that the committee should know about the share of taxes and duties and other factors contributing to the recent increase of prices.

The issue of dues of Pakistan Steel Mills (PSM) retired employees also came under consideration. The committee was informed that about 1000 retired employees have died without receiving their arrears. Chairman Standing Committee also cited a couple of "disturbing" incidents of retired employees with the committee. He said, the heirs of one retired employee who died did not have money for his final rites and another died recently as he did not have money for treatment. Chairman Standing Committee showed the video message of deceased to the Advisor.