ISLAMABAD: The government will increase local vehicles production to 300,000 units by the end of the ongoing year, Federal Minister for Industries and Production Khusro Bakhtyar said Wednesday.

Addressing a presser here along with Federal Minister for Information Fawad Hussain Chaudhry, Bakhtyar said that the automotive sector is one of the major industrial sectors of the country and the government wanted to create job opportunities for the people as production of one car creates five job opportunities.

He said that the auto sector has the potential to drive the entire economy of the country and it has 7.81 percentage in Large Scale Manufacturing.

The auto sector not only has dense backward and forward linkages that made it an engine of growth but it also has great potential for export.

He said that all these steps are mainly focused on the localisation of the automotive industry enabling Pakistan to export auto spare parts.

He further said that the government intends to promote localisation of auto parts with a clear objective to create more employment, promote downstream industry in the country and save foreign exchange.

"The biggest incentive for automobile sector was that demand increases when prices are reduced. So the government has removed federal excise duty (FED) and additional customs duty (ACD) on cars along with reduction of sales tax on small cars," said Bakhtyar.

In the Finance Bill 2021, the government had cut FED on all vehicles up to 3,000cc by 2.5 per cent, while abolishing it on vehicles from 660cc to 1,000cc.

The general sales tax was also slashed to 12.5pc from 17pc for cars up to 1,000cc.

The government had also reduced ACD on all vehicles from seven to 2pc and a notification in this regard was issued on June 30.

These measures were aimed at providing some relief to the customers from July 1, but so far, the prices have been intact to their previous levels. The condition of 30 percent value addition has been introduced on imported raw materials and components to be used for manufacturing of vehicles in the country, to ensure rapid localization, government shall update the localized manufacturing of auto parts every six months. The government has therefore introduced measures to increase the production of vehicles to approximately 300,000 in this fiscal year and up to 500,000 by 2025, even more importantly strong incentives have been created for localization.

Talking about the recently launched (Meri Gari Scheme), the minister said that to make small cars financially affordable for the middle class, following steps have been introduced in financial budget 2021-22. (i) For vehicles up to 1000cc, the government has removed Federal Excise Duty (FED), and Additional Customs Duty (ACD) on locally manufactured cars. (ii) Sales Tax has also been reduced. (iii) Reduction of duties and taxes on import of small car (CBUs) to bridge the demand supply gap

He stated that ACD and FED on all cars have been reduced, the government’s intervention will significantly reduce the prices of all cars in the coming days and the manufacturer have promised to pass on the impact of reduced tax regime to customers immediately.

He said that after the implementation of the government plan, the prices of cars are expected to be reduced as under: (i) Below 850cc car price will reduce by Rs104,458–Rs142,388 approximately (iii) Car prices of over 1000cc to 1,500cc will be reduced by Rs112,118- Rs186,375,(iii) Expected decrease of more than Rs169,958 of 1800cc cars category,(iv) above 2000cc car price will reduce by more than Rs229,458, and(v) Price reduction is expected in each vehicle category being manufactured locally.

Talking about the “On Money” issue, the minister said that the government has introduced the following measures to rid the car consumers of the on money ill: (I) Rs50,000 to Rs200,000 penalty where the first registration is not in the name of the person who booked the vehicle. (ii) Compulsory payment of KIBOR+3% mark up by manufacturers on delivery beyond 60 days. (iii) Maximum upfront payment on booking not to exceed 20 percent of the invoice value at the time of booking.(iv) Real-time trackable online booking and manufacturing status safety measures in cars. He further said that the government will compel auto makers to ensure and improve road safety, international safety measures such as brakes, steering, tyres, lightening, safety belts, airbags and collision will be met.

He said that local auto makers will implement 17 shortlisted regulations in phased manner over a period of three years.

The minister said that the exports targets for the manufacturers will be up to 10 percent of the import value by the end of five years of this proposed policy.

He said that to promote Electronic Vehicles (EVs) the government will take a number of steps as increase in EVs in the local market would encourage auto companies to invest in related infrastructure in Pakistan to facilitate EVs, so following incentives are allowed to increase the number of imports of EVs: (i) Customs Duty (CD) on specific parts for electric vehicles to attract one percent and (ii) 10 percent CD on import of CBUs of EVs.

The federal minister explained that car manufacturers would also be made to pay penalties to customers, if they delayed vehicle delivery beyond 60 days and customers would be able to check online the current manufacturing stage of their vehicle.

He said the government's focus was now on improving car quality, such as the introduction of modern safety features, which would eventually make the automobile sector export-oriented.

The new auto policy would be presented before the Cabinet in the first week of August, he said, adding that measures for hybrid and electric vehicles had been taken in it as well. "The import duty on electric vehicles has been reduced to 10 percent from 25 percent, so they arrive in Pakistan and their infrastructure such as charging stations can be developed."

The federal minister also addressed motorcycle production and said 2.6 million units had been produced this year, which would be increased to 3m next year.

He added that 75,000 job opportunities would arise from this mostly in rural areas.

It was necessary to increase the country's engineering and manufacturing base to keep growth sustainable, Bakhtyar stressed, adding that the government was focused on localisation now. He said localisation was focused upon in the new auto policy as well.

Copyright Business Recorder, 2021