Consistent policies to stimulate investment in auto industry

Director General Pakistan Automotive Manufacturers Association briefs media on problems faced by the industry.

KARACHI: Consistent and long-term policies are necessary to ensure further investment in the automobile sector, Director General Pakistan Automotive Manufacturers Association, Abdul Waheed, said on Friday.

In a media briefing, Waheed said that automakers would welcome new car manufacturers or original equipment manufacturers (OEMs) as it will strengthen the auto industry with handsome investments and a healthy competition.

The government should facilitate new entrants with soft loans, land provision and infrastructure development instead of deviating from the Auto Industry Development Plan (AIDP), he added.

He explained that OEMs are importing components, which are not produced in the country, at 32.5 per cent duty. However, if they import any components that are produced in the country they would have to pay a duty of 50 per cent. “It is an agreed arrangement that protects rights of local vendors,” he said.

However, if new entrants are allowed to import 100 per cent components at 32.5 per cent duty for some years, it will severely affect the business of local auto-part vendors and will also give an edge to the new entrants over existing manufacturers.

He said that a proposed policy has relaxed customs duties for new entrants allowing them to import completely knocked down (CKD) kits at five per cent duty in the first year, 10 per cent in the second year and 20 per cent in the third year, which will deny a level-playing field to existing manufacturers, besides pushing auto venders out of business.

CEO Indus Motor Corporation (IMC), Pervaiz Ghais, said that the government wants to lure new car manufacturers but at the same time it is encouraging car imports.

Director Marketing IMC, Raza Ansari, said that local automobile manufacturers have been working aggressively on AIDP to bridge the supply and demand gap which has been reduced to zero and cars of IMC are available with its dealers.

Ansari said that prices of some important inputs such as steel have increased 26 per cent over the last two years, while Japanese yen has appreciated by 22 per cent and the US dollar by six per cent. However, IMC has increased its vehicle prices by only seven per cent during the period.

He claimed that many IMC variants being produced in Pakistan are cheaper than those in India and Thailand.

Ansari said that implementation of AIDP will help the government support the ailing economy as the local industry will not only save foreign exchange but will also provide more revenues than imported vehicles.

Meanwhile, car importers met President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Senator Haji Ghulam Ali, on Friday to raise their concerns. Ali assured the delegation of All Pakistan Motor Dealers Association (APMDA) that he will discuss the issues in the Senate and at government level.

After allowing imports of five-year-old cars, the government abruptly scrapped its decision in less than a month, sparking worries among car importers who have already purchased used cars worth Rs5-6 billion.

Published in The Express Tribune, January 8^th, 2011.