GST hike feared to hit auto sales

Pak Suzuki Motor Company has cautioned the government that the proposed increase in general sales tax (GST) in the budget for fiscal year 2025-26 may result in a significant decline in sales of the auto industry, which will negatively impact original equipment manufacturers (OEMs) as well as vendors.

Discussing the negative impact of 18% GST, Pak Suzuki Managing Director Hiroshi Kawamura said that it would also affect employment across the automotive value chain, according to sources.

He mentioned that economic growth was sustainable with 12% sales tax and any further increase would impact the entire auto industry. At present, around 2.5 million direct and indirect jobs are being provided by the automobile industry. "This number may further increase if 12.5% GST continues in this category," he said.

Hiroshi Kawamura held a meeting with Special Assistant to Prime Minister on Industries Haroon Akhtar Khan on Tuesday to review the impact of the budget and the proposed new tariff policy.

"The impact of higher sales tax is always borne by customers," Kawamura remarked. He voiced concern over the proposed increase in sales tax on vehicles below 850cc engine capacity from 12.5% to 18%, warning that such measures could adversely affect the sector.

He stated that the tax hike could lead to higher vehicle prices, reducing affordability and dampening market demand. The price increase may also hinder industry growth and increase pressure on production.

In response, the PM aide reiterated the government's resolve to support the auto industry as Prime Minister Shehbaz Sharif was committed to the sector's growth and was aware of the challenges.

"Progress demands unity and collaboration. The auto industry is a vital source of employment and local manufacturing strength," he remarked.

Haroon Akhtar assured the MD that the PM would not allow the sector to falter and pledged continued engagement with industry stakeholders to help navigate challenges and seize growth opportunities.

Separately, the PM special assistant held a meeting with Master Changan Motors CEO Danial Malik to discuss the strategic challenges faced by the auto industry and potential implications of the budget.

They deliberated on the importance of transitioning to New Energy Vehicles (NEVs), especially electric vehicles, as a national priority. Malik stressed the need for sustained policy support and industry-friendly measures to ensure a stable and growth-oriented environment.

Haroon Akhtar reaffirmed the government's commitment to implementing a sustainable and modern auto policy aligned with global trends. He announced that the EV policy would be unveiled soon.

"The prime minister envisions a globally competitive auto industry," he said. "Our EV policy will provide a comprehensive framework for infrastructure development, investment incentives and policy facilitation." He added that special incentives would be offered to promote the adoption of EVs, which would support long-term industrial growth and environmental sustainability.