Import bar raised again: Waiting for a better deal

Prospective car buyers welcome government’s decision.

KARACHI: Many prospective car buyers are hoping to grab a better set of wheels following the government’s decision to ease import restrictions. After much deliberation, the federal cabinet finally approved the proposal for easing the age limit for the import of cars to five years from the previous bar of three years.

The decision had earlier been announced by the Economic Coordination Committee, only to be struck down by Prime Minister Yousaf Raza Gilani, just 20 days after the initial nod. However, the tale took another turn with the federal cabinet’s decision on Wednesday – a turn many car buyers are hoping will lead to cheaper vehicles in the country.

“I had been following this story in newspapers for weeks,” said Tabish Hashmi, a prospective car buyer. He currently drives a Toyota Belta but hopes to buy a different car now that import restrictions have been eased. “I was thinking of getting a new Swift but maybe I can get a Vitz instead if I wait another month,” Hashmi told The Express Tribune.

“First of all, there should never have been any restrictions on imports because as long as people pay the duty, the government is already getting its due share,” said Fahad Mujib, another citizen looking to shift rides.

There are scores of would-be car owners like Hashmi and Mujib, who are hoping that the recent decision will offer them a better pool of choices for their next set of wheels. Industry insiders expect import of 20,000 cars over the next six months following the relaxation.

“From the buyers’ point of view this is a great decision,” said Ali Ahmed, owner of Fifth Gear Automobiles – a used car showroom in Karachi. “The most popular car manufacturer in terms of prestige is Toyota so we will see a lot of Corollas, Premios and Vitz coming here over the next few months,” he said.

He rejected the perception that the policy will be more beneficial for the country’s elite, saying “most of the Prados and Land Cruisers being imported are less than three years old and were being imported even before the rules were relaxed.”

Car dealers in the country are also a merry bunch, following the decision. “Finally, there is some realisation that there should be a level-playing field and that the lobby protecting local assemblers are not helping the economy,” said Aristocars owner Sarfaraz Dhanji.

But local car assemblers are less than ecstatic over the decision. Indus Motor Company Marketing Director Raza Ansari highlighted that the car import scheme is only meant for Pakistanis residing abroad. He stressed that misuse of the relaxation will put the car assemblers in jeopardy.

“The government has to decide whether it wants to promote industries or simply trade cars,” said Ansari, adding “if they want the latter then we can also shut down our plants and start trading in imports.”

He acknowledged the wider choice of vehicles that will be available to consumers but contended that prices of cars will not come down significantly by this move.

However, industry analysts stress that the import of older cars will help curb future price increases. “This decision will lead to a reduction in imported car prices, hence not only affecting local assemblers’ sales but also restricting them from increasing car prices frequently and will also restrict their margins,” said Topline Securities analyst Furqan Punjani.

The analyst also highlighted that the government is reviewing a proposal to increase depreciation allowance on imported cars from one per cent per year to two per cent. “If this proposal is accepted, used imported car prices in 1,000cc category would fall by Rs45,000 to Rs95,000,” said Punjani.

Experts have opined that cars in the 1,000cc category will suffer the most from the easing of import restrictions. In recent months, the government had often threatened the local assemblers with relaxations in import restrictions due to rising prices of their cars. Whether the benefits to car buyers will outweigh the difficulties to be faced by local manufacturers will soon be clearer.

Published in The Express Tribune, January 28^th,  2011.