Sinking local car sales irk auto parts manufacturers

Imports put the brakes on sale of locally manufactured autos.

KARACHI:

The 40% contraction in car sales figure of July, 2012 has irked auto parts manufacturers who blamed the government’s liberal car import policy responsible for sluggish sales of locally manufactured automobiles.

Pakistan Association of Automotive Parts Accessories Manufacturers (Paapam) Chairman Syed Nabeel Hashmi expressed concern over the considerable decline of 46% in car sales in July and blamed it on the import of second-hand cars in the country.

In a press release on Saturday, he said that payments for used cars imports are made illegally through hawala – an alternative remittance channel outside the traditional banking system – in the market which makes it difficult for the State Bank of Pakistan to track this laundered cash.

He said that car imports are continuously surging; hurting the local car industry.

On the other hand, car importers say that the complaints of auto parts vendors are baseless because the imported used cars operate in their own market, different from the locally manufactured new cars market.

A leading car importer said that the government assured car importers that it will further increase the import age limit from the present five years to 10 years in the upcoming trade policy.

If this happens, it will certainly increase car imports into the country. Last year, Pakistan imported over 55,000 cars, up 162% from previous year figure of 21,000 units. While the country produced 157,325 cars locally during the fiscal year 2011-12.

Allowing commercial import of used vehicles is detrimental to the local auto industry, which has invested millions of rupees over the past decade and has been a source of direct and indirect employment for millions of people,” observed Hashmi.

He said that the government suffered Rs14 billion in losses in the past 12 months in the shape of custom duties by allowing import of used cars under special regime (SRO 577), as over 55,000 vehicles have been shipped into Pakistan during this period. Besides, the automotive parts vending industry has lost an estimated Rs7 billion in sales, he said. Whereas a locally made car besides generating economic activity, acquires parts from local vendors valued up to Rs300,000-400,000 per car, the imported 55,000 vehicles have deprived local vendors of this business, he added.

With double-digit interest rates, unprecedented exchange rate depreciation and unavailability of gas and electricity, the government must intervene to ensure that local engineering units do not shutdown, he said.

On the inflating prices of locally assembled cars, Usman Malik said that the best way of reducing car prices is to increase level of localisation. He urged government to implement Auto Industry Development Programme in letter and spirit to achieve the benefits of cost reduction.

Published in The Express Tribune, August 12^th, 2012.