64% grey vehicles imported

Illegal vehicles in market are valued at Rs32.5 billion

Zafar Bhutta February 04, 2023
Clearance of vehicles will give revenue of over Rs2 billion to the FBR that is facing challenges in meeting monthly tax targets. photo: file


The auto industry has complained that the import of vehicles by grey market has been on a constant rise, which has hurt the business of local manufacturers and distributors.

It says the import of vehicles by official distributors and companies stands very low as they are facing restrictions on opening Letters of Credit (LCs) due to dollar crunch in the country.

Pakistan Automotive Manufacturers Association, in a recent letter to the State Bank of Pakistan, pointed out that LC curbs had choked the import of all completely knocked down (CKD) components and auto parts.

However, officials of the auto industry argued that the grey market had continued to hit the legal industry as the share of those vehicles reached 64% out of the total vehicles imported in the last fiscal year. They remarked that most of the industries failed to generate green and positive numbers due to mismanagement and the auto sector was no different.

While the domestic auto sector was in doldrums owing to the rising US dollar rate and the dip in demand due to weak spending power, the official distributors and companies engaged in vehicle imports also borne the brunt, they said.

Industry officials emphasised that the country needed foreign investors to come in and penetrate the market for more competitive products, but if the grey areas prevailed over the regulated arenas, the investors would be discouraged.

According to the data of vehicles imported in fiscal year 2021-22, the official distributors had a market share of only 16.75% whereas the share of vehicles imported by companies was around 19.20%. It meant that the remaining 64.05% share, amounting to Rs32.5 billion worth of vehicles, was held by the grey area, the industry officials said.

These are used and refurbished vehicles, most of which are unregulated with no tax payments and also include non-customs-duty-paid vehicles, which directly impacts the national exchequer.

These refurbished vehicles create environmental hazards as well. When the world was moving towards lower emissions and electric vehicles, the grey market was not being governed properly, argued the industry officials.

The vehicles imported by the official distributors such as BMW, Audi, Mercedes and Rinco LLC had an import value of approximately Rs8 billion whereas the vehicles imported by the companies such as MG, Range Rover, Chery, Proton, KIA and Changan were worth around Rs9.7 billion.

Published in The Express Tribune, February 4th, 2023.

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