Import of second-hand cars

While increasing the age limit for imported cars may help consumers, it could hurt Pakistan’s fragile economy.


Editorial August 17, 2010

After a report by the Competition Commission on price-fixing in the automobile industry, the commerce ministry has recommended to the government that it relax rules on the import of used cars. At present, only used cars that are up to three years old can be imported; the ministry would like that increased to include five-year-old cars. The move, if implemented, could certainly benefit consumers. Even though sales of cars have slumped in recent months, prices have kept on increasing, which the auto sector is blaming on the increase in the GST. The government has been asking car manufacturers to lower prices for about six months and, since their plea has fallen on deaf ears, this move should help in doing so.

While increasing the age limit for imported cars may help consumers, it could hurt Pakistan’s fragile economy. In the last fiscal year, Pakistan had a trade deficit of over $15 billion, a figure that is already expected to rise as Pakistan will have a higher food import bill in the wake of the floods. An increase in the import of second-hand cars may be a luxury the country can ill-afford. And since congestion is a major issue in all of the major cities, an increase in the number of cars on the road may not be a good thing. Consumers should also be aware that spare parts for older imported cars may not be readily available and repairs could also be more costly. The government needs to keep in mind the lessons of the Shaukat Aziz era, when an across-the-board relaxation in duties led to an increase in the import of consumer goods, which benefited the emerging middle class but did very little to fix, and may actually have hurt, the long-term health of the economy.

Published in The Express Tribune, August 18th, 2010.

COMMENTS (2)

Atif | 11 years ago | Reply Although if the proposal goes ahead it would finally give some respite to consumers. It would also be far more more beneficial if the government allows new assemblers to enter the market on relaxed terms. Currently in the small car segment, Suzuki is the only local assembler and has a complete monopoly in the 1000cc segment. The government should also ensure that the Japanese assemblers do not exploit the Pakistani market. Currently Paksuzuki is dumping obsolete cars which are no longer sold in any other country in the world. By mass producing a early 1980s technology Mehran which uses a carb based system (already banned across the world), Pakistan is creating a very ineffective auto industry whose products have no export potential. The government needs to take serious notice of poor production quality, obsolete models, lack of emission standards, and of course the malpractice of Premium which authorized dealers take part in openly.
Saleem Siddiqi | 11 years ago | Reply The present Car Manufacturers in Pakistan have made a strong Cartel. Every now and then at their own sweet will/ whim, they keep on increasing local Car selling prices without consulting with the Government on the plea that the Ruppee is depreciating even though most of its parts are made and assembled in Pakistan. In order to curtail / discourage this Cartel / Monopoly the present is the best suggestion / move Government has taken and I congratulate them for this bold step. The import of used car will create a fair competition in the local Automobile market which a buyer in Pakistan will certainly benefit. Also the waiting time to get a new Pakisan Car will also vanish. Despite all the odds as reported by you, the advantage of owning a Car at a reasonable price by a Pakistani is their right and we must encourage such a move of competition to destablize current cartel scenario. The Import procedure should be very simple and should be one window operation to avoid Car Dealers and other coronies benefitting from this move. The simple procedure will enable a normal Pakistani to directly import a car for him. Government can also give more incentives in reduced Customs Duties / Taxes if the Foreign Currency is coming from overseas Pakistani remittance. This will not burden / hurt Government of Pakistan with Foreign Exchange constraints. To avoid congestion of Cars on the road, we must follow Singapore policy which does not allow a person to own more than one car. If he/ she wishes to buy a new car, he / she must use his old car's number plate as new Registration plate is no longer issued to them to curb rush of cars on the Road. It is hoped that Government will review these suggestions for strict implementation. Regards. Dr. Saleem Siddiqi Qatar
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