Car makers get the better of importers

KARACHI: The automobile sector has been left mostly untouched in the federal budget announced on Saturday.

The only major change is the government waiving the 15 per cent customs duty on the import of LPG buses to encourage use of cheaper environment friendly fuel, said Abdul Azim, automobile analyst, Invest Capital Investment Bank.

Local importers wanted the age-limit of imported cars to be relaxed, but it was not mentioned in the budget announcement. They want to be able to import cars that are five years old. They are currently only allowed to import cars that are a maximum of three years old.

“Priority was given to car manufacturers as they contribute highly to the Large Scale Manufacturing sector,” said Azim.

LSM growth has been a major contributor to the overall gross domestic product growth of 4.1 per cent in current fiscal year of 2010.

“The manufacturers have the right to be favoured as they bring foreign investment and employ large number of people,” said General Manager, Honda Drive-in, Hussain Abbas.

“Car manufacturers have a major share in the automobile industry and importers are only a minor portion of the automobile sector,” said Abbas.

Increasing the age-limit was a genuine demand, which was made in the best interest of the consumers, said Sarfaraz Hussain Dhanji, owner of Aristocars, a local car importing dealership. Imports bring valuable foreign exchange through duties and help stabilise the balance of payments of the country, he informed.

He added that the implementation of the demand would have broken the monopoly of the local manufacturers and given consumers the choice of buying cars at lower rates.

Cars here are more expensive in Pakistan than other countries and consumers are charged a lot more for the same car available at cheaper rates in other countries, he added. There is also misconceptions as car manufacturers only assemble cars here and they do not manufacture them, he further said.

Car manufacturers pay 20-25 per cent duty on completely knocked down (CKD) kits for parts like engine and gear while we have to pay 200 per cent duty for the car, this is unjust, he said, adding that manufacturers dictated the policy keeping themselves and not the consumers in mind.

Published in the Express Tribune, June 6^th, 2010.