Car-makers blindsided by import-friendly policies

Increased depreciation allowance on used car imports draws heavy criticism.

KARACHI:

The local car manufacturing industry has lambasted the decision of the Economic Coordination Committee (ECC) to increase the maximum depreciation allowance on imported cars from 50 to 60 per cent.

Speaking to The Express Tribune, Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Chairman Aamir Allawala claimed, “Members of the government are pursuing vested interests in unfolding a step-by-step plan to decimate the local automotive industry.”

The industry representative also asserted, “ECC is soon expected to approve an increase in the depreciation rate on used cars from one per cent to two per cent per annum, thus, slashing the customs duty on these cars to half the current rate.”

Allawala questioned the economic viability of the government’s policy of relaxations in car imports. He warned that these policies would threaten the local car industry and could cause massive job losses in the sector.

“Pakistan desperately needs industry-friendly policies that lead to employment generation and alleviation of poverty, rather than appeasement of the elite class for purchasing Vitz and Prados,” said Allawala.

“The government should be facilitating the existing industry and devising policies to attract new entrants, instead of appeasing traders,” said Indus Motor Marketing Director Raza Ansari. Ansari acknowledged that car prices had risen in recent years but asserted, “the average increase has been about seven per cent annually, which is considerably less than the rise in prices of inputs and the depreciation of the rupee against other currencies.”

He also pointed out that the car import scheme is meant for Pakistanis residing abroad but is instead being exploited by car importers. “We have documentary evidence to prove that cars manufactured over seven years ago are being imported and many importers are under-invoicing their shipments by declaring 1,500cc cars as 1,300cc models,” alleged Ansari. “Government officials are party to these crimes because they too are benefitting,” he added.

“This decision will lower government revenue and benefit a handful of car dealers,” said a spokesperson for the Pakistan Automotive Manufacturers Association. He highlighted that the domestic industry has an annual turnover of over Rs300 billion and employs close to 200,000 workers.

Rejecting the contention that car manufacturers have failed to invest in the country, the spokesperson said, “original equipment manufacturers (OEM) have further invested over Rs20 billion during the past four years to expand production capacities.”

Car dealers welcome import relaxations

“These steps show that the government has realised that the local car industry has not kept its part of the bargain and should not be given a free ride at the expense of consumers,” said car dealer Sarfaraz Dhanji.

He asserted that a level-playing field should be created for local and international car manufacturers, adding that the relaxation in import policies will bode well for prospective car buyers.

Dealers have challenged the assertion that only the elite will benefit from the changed import rules, highlighting that imported Land Cruisers, Prados and Range Rovers are usually less than three years old, while older models of more economical cars would likely be imported, now that duties have been lowered.

Published in The Express Tribune, March 4^th, 2011.