Government urged to commercialise import of used vehicles

Used car imports decline 43.6% to $156m in first half of FY19

KARACHI: Used car importers have urged the government to commercialise the import of second hand vehicles, which will enhance choices for customers and generate revenue for the government in the form of duty.

Used cars are imported under three schemes which are; transfer of residence (TR), gift, and baggage.

Under the baggage scheme, a person goes abroad and returns with a car. According to law, a person can only send one vehicle to Pakistan in a year.

During the first half of the current fiscal year, the value of imported second hand vehicles plummeted 43.6% to $156 million against $277 million recorded in the same period of the previous fiscal year.

This decline came following the government’s introduction of a new policy according to which importer of the vehicle would be liable to pay the duty in dollar terms.

Nearly 80-90% used cars have small engine capacities of 660cc to 1000cc, according to All Pakistan Motor Dealers Association Chairman HM Shahzad.

Two year ago, the importers of old cars paid 91-225% in duty, which the government has now hiked even further.

All three schemes have the same duty, which grow as the engine capacity of the car increases.

“Majority of the used cars in Pakistan come from Japan and they offer better features than locally assembled ones,” claimed Shahzad.

However, the import of used cars has is also blamed for pressure on the country’s meagre foreign exchange reserves.

“This (used car imports) is because it hurts the investment in the automobile sector. In this regard, the government has announced the recent policy to discourage import and encourage new players in the country,” said BMA Capital analyst Faiz Sultan. “Without investment, jobs cannot be created which this country needs badly.” 

Published in The Express Tribune, April 5^th, 2019.

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