A promising auto policy

The three existing carmakers are not going to be too happy with measures taken under new auto policy

After much deliberation and a very lengthy wait, the auto policy was finally approved by the Economic Coordination Committee on March 15, clearing months of speculation as to the kinds of incentives that would be offered to carmakers other than the existing three in the market. While the existing auto industry boasts of its growth — which, one must note, has come on the back of several external factors that have aided its profitability — there was growing resentment among the public and official circles that have criticised the lack of competition and choice as well as the high price of vehicles in Pakistan. Hence, the auto policy was not just meant to serve as a tool to address these issues, but also present the government’s vision for the country’s auto sector.

The policy does not increase the age limit on the import of used cars, maintaining the status quo of three years. But it has incentivised potential entrants by offering them lower tax rates on localised and imported parts, duty-free import of plant and machinery for setting up assembly and manufacturing facilities, while permitting the import of 100 vehicles of the same variants in the form of completely built units at 50 per cent of the prevailing duty for test marketing after the groundbreaking of the project. These incentives are likely to persuade foreign manufacturers to establish a footprint in Pakistan, where a sizeable demand exists, helped by low oil prices, availability of cheap financing and lack of an efficient public transport system. The three existing carmakers are not going to be too happy with these measures. The government has also excluded the definition of medium knocked down units, indicating that the plan is clear — enable the manufacturer to establish a full-fledged plant in the country. The Board of Investment chairman has said that the existing car manufacturers will not be entitled to the benefits that are being offered to the new investors. We welcome the auto policy and hope it helps revive sick units, attracts foreign manufacturers and increases competition among carmakers for the greater public good.

Published in The Express Tribune, March 20^th, 2016.

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