‘Taxes, used car imports driving up car prices’

IMC CEO stresses need for comprehensive import policy

ISLAMABAD:

The Chief Executive Officer of Indus Motor Company (IMC), Ali Asghar Jamali, has pointed to issues such as high taxation, inflation, used car imports, and currency instability as drivers of higher prices for locally produced cars in Pakistan. In a meeting with journalists in Islamabad, Jamali emphasised the need for a comprehensive import policy to support the growth of the local auto industry while addressing the challenges posed by the heavy import of used cars. He also urged the government to review taxes being imposed and take measures, like signing free trade agreements (FTA) with different countries to reduce duties and other restrictions, to open up markets for car exports.

The IMC CEO revealed that over 6,500 used cars were imported during the fiscal year 2022-23, and more than 7,500 units have already been imported in the first three months of the current fiscal year. He expressed concern that these used car imports not only undermine the progress achieved through localisation by the local auto industry but also hinder the potential for further localisation in Pakistan.

Despite these challenges, Jamali acknowledged the recent relaxation in the opening of Letters of Credit (LCs) for imports, which has aided the local industry in procuring raw materials. He highlighted that Original Equipment Manufacturers (OEMs) saw improved sales of passenger cars and light commercial vehicles in September 2023 due to these relaxations, although there was still a 26% decline in sales on a year-on-year basis.

In response to the current challenges and in an effort to contribute to a more sustainable future, Jamali announced the upcoming launch of Pakistan’s first locally made Hybrid C SUV. He emphasised that hybrid electric vehicles (HEVs) are not only a more environmentally friendly solution but also have positive economic implications, including employment opportunities and export potential.

Jamali also pointed out the investment made by Toyota, mentioning that Toyota invested $100 million in producing HEV vehicles in Pakistan. The adoption of hybrid technology is expected to reduce Pakistan’s import bill and save approximately $37 million per year with 30 thousand units of HEVs.

While discussing the production and low-demand issues faced by the auto industry, Jamali praised the government for its localisation-driven policy and expressed IMC’s commitment to overcoming challenges and working towards a brighter and more sustainable future for the auto industry in Pakistan.

Jamali's concerns about used car imports nullifying the achievements of the local auto industry were raised in a previous meeting with journalists last month. He stressed that the government should prioritise supporting local policy for the auto industry, given the country’s minimal foreign exchange reserves, and avoid permitting imports of used cars.

Despite the uncertainty surrounding supply-side recovery, IMC did not resort to layoffs, demonstrating its commitment to the country and the well-being of its employees.

Regarding restrictions on opening Letters of Credit at the time, Jamali noted that the auto industry had been facing this issue for some time, which has made it challenging to maintain sales. IMC faced a 58% decline in its sales volume from January to June 2023 due to these restrictions.

Speaking about HEVs, Jamali highlighted Pakistan’s vulnerability to climate change, emphasising that HEVs are a sustainable solution to economic problems. He stated that Toyota has invested $100 million to produce HEVs in Pakistan, and the Corolla Cross, Pakistan’s first locally manufactured HEV SUV, will be launched soon.

Published in The Express Tribune, November 9^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.