Auto industry seeks protection from car imports

Claims used vehicle imports caused Rs45b loss to industry, economy

ISLAMABAD:

The auto industry has sought government’s protection through tightening restrictions on the import of used cars in the upcoming budget for fiscal year 2024-25.

Background discussions with the auto industry revealed that during the first eight months (Jul-Feb) of 2023-24, the import of used cars caused a loss of over Rs45 billion to the local industry, the economy, and most importantly, severely risked the livelihoods of millions of people.

The government initially allowed the import of used cars by the overseas Pakistanis, but the facility is being exploited through corrupt practices. Vehicles are being imported in the name of expatriate Pakistanis but are used for profit-making in the country.

In the Pakistani market, where vehicles are assembled and manufactured by 13 leading players, the authorities have permitted the import of used cars at favourable terms, putting automotive manufacturers and assemblers at a disadvantage.

These 13 players and their associated vendor networks currently support over 2.5 million jobs, with the wider industry-related employment reaching almost 5 million.

Pakistan is ranked 34th among 49 passenger car manufacturing countries and is one of only 16 countries that manufactures complete vehicle segments, including passenger cars, light commercial vehicles, trucks, buses and tractors.

Despite numerous challenges, the industry says it has localised over 60% of manufacturing by producing internationally tested and high-quality parts.

“This industry is heavily burdened with taxes and duties, resulting in exorbitant retail prices for locally manufactured automobiles,” an industry official remarked.

Auto industry players say retail prices often include over 100% of the actual cost in taxes and duties.

The industry appealed to the authorities to either stop or discourage the import of used cars to allow it to grow, thrive and contribute more to local resources. It also called for revisiting industrial policies and supporting the local industry through favourable and unbiased policies.

According to industry players, the importers of used cars are potentially using grey channels for their transactions. With over 60% of car parts produced locally, they said, the unfavourable policies resulted in inefficient and only partially operational production facilities, leading to job losses and a lack of motivation to grow.

A new model’s design, manufacturing and launch require around four years of development, research, testing, quality control from international facilities, and millions of dollars in investment. This investment is feared to be jeopardised by the import of used cars.

The local industry, with an investment of over $2.5 billion and a production capacity of 500,000 units per annum, has been reduced to just around 100,000 units during the current fiscal year.

Published in The Express Tribune, May 19^th, 2024.

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