New auto players unperturbed by tax return condition

There are expectations tax return filers will increase after govt’s restriction

KARACHI: Around 50% of new car buyers are non-filers of income tax returns that will not be able to buy new vehicles from July 1. It is feared to deal a blow to upcoming industry players.

However, most of the new entrants, who have to make their presence felt in fiscal year 2020, are unperturbed by the issue, which is supposed to bring down car sales in the country.



“It is too early for us to get affected by this; we are expecting the issue to settle down by the time we (properly) enter the market,” a top official of a new carmaker told The Express Tribune requesting anonymity.

The tendency to become a tax return filer has already started gaining momentum and by the time the new players would enter the market, the issue would subside, he added.

“There was no such law in the past, but it is here now. People will now pay heed to it since they will now be directly affected,” he said.

Nissan is expected to start selling its cars in Pakistan in early 2019 whereas Kia and Hyundai will roll out their vehicles in the middle and end of 2019 respectively. United Motors is expected to bring its cars in market in the next few months.



“The auto industry will be affected by this new condition, however, many non-filers of tax returns will be buying cars through a third person, a relative or a friend, who is a filer. But it does not mean it will not affect auto sales,” said JS Global Research auto analyst Ahmed Lakhani. He said there were only 1.2 million tax return filers that were expected to increase after the restriction on non-filers, who also could not buy land of above Rs5 million.

According to a research report of Elixir Securities, Pakistan’s auto industry is all set to record a huge increase of 77% in production capacity by financial year 2022.



At present, the production capacity is 250,000 units, which will increase to 443,000 by FY22. The report added that the demand would also go up, which would stand at 500,000 units by FY24.

The report said Kia and Hyundai would grab a market share of 5-10% each in the first three years of their entry into Pakistan’s market.

Published in The Express Tribune, May 31^st, 2018.

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