Competition Commission comes out swinging against auto lobby’s claims
Uses data to illustrate how restriction in car imports is hurting consumer interest.
The CCP recommends easing the import regime, saying it will have a disciplinary effect in this regard. PHOTO: FILE
KARACHI:
Contrary to what the automakers’ lobby has been arguing for over the past year, the Competition Commission of Pakistan (CCP) – the country’s top antitrust watchdog – has recommended that the government should open domestic markets to the import of new cars at reasonable tariffs.
In a study released on Tuesday, it has made a case for allowing foreign competition in the sector, which it says will actually benefit consumers, bring in new technology, and offer more choices to buyers.
Focused solely on the automobile sector, the latest research report is part of the CCP’s ongoing sector-wise studies that seek to assess anti-competitive tendencies in various sectors. In the study, the watchdog has analysed market competition in the passenger cars segment in Pakistan’s automobile sector.
The study has found that Pakistan’s automobile industry is inward-looking and tries to protect itself through the use of regulatory instruments. The CCP recommends that Pakistan needs to develop the automobile industry – currently dominated by only three major players – instead of protecting it. It recommends easing the import regime, saying it will have a disciplinary effect in this regard.
At present, Pak Suzuki is the sole local manufacturer in the 800cc and 1,000cc market segment. In the 1,300-1,800cc cars segment, the state of competition is slightly better, as Honda, Suzuki and Toyota compete with each other to increase their market shares. However, parallel increases and decreases in prices by these manufacturers over the last three years signal a cause of concern from the perspective of competition, the CCP says.
In all three market-segments, manufacturers are sitting on excess installed capacities; and, by not utilising their excess capacities, the firms seem to signal their inward-looking approach towards the domestic industry, says the CCP.
The study also points out a significant cause of concern from the motor safety perspective. In the absence of regulations, domestic automobile manufacturers do not offer safety features such as anti-lock breaking system (ABS), airbags and lower carbon emissions. These are coupled with the absence of quality specifications such as alloy rims, power steering and windows in all their vehicles, the CCP said.
“Dealerships are merely agents of manufacturing companies and have no real incentive to compete in the market,” it said.
Based on its findings, the CCP has recommended various short- and long-term measures. It has suggested that the government remove barriers to entry and lower import tariffs and make them uniform across all automobile categories.
“This will make cars more affordable, push the local assemblers to competition, and incentivise the automobile industry to strive towards international standards and pricing,” it said.
The CCP said it opposes the recent reduction in allowed age limit for the import of used cars from five to three years. “The import of five-year old vehicles provides a better competitive environment in the local automobile industry,” it said. The import of used cars, currently allowed under the gift, personal and baggage schemes, should be reopened according to the watchdog.
The Competition Commission has also suggested that a recently-implemented measure that lowers the depreciation allowance for imported used cars needs to be reconsidered, as it ‘may’ reduce consumer welfare by increasing the price of imports.
Published in The Express Tribune, February 20th, 2013.
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Contrary to what the automakers’ lobby has been arguing for over the past year, the Competition Commission of Pakistan (CCP) – the country’s top antitrust watchdog – has recommended that the government should open domestic markets to the import of new cars at reasonable tariffs.
In a study released on Tuesday, it has made a case for allowing foreign competition in the sector, which it says will actually benefit consumers, bring in new technology, and offer more choices to buyers.
Focused solely on the automobile sector, the latest research report is part of the CCP’s ongoing sector-wise studies that seek to assess anti-competitive tendencies in various sectors. In the study, the watchdog has analysed market competition in the passenger cars segment in Pakistan’s automobile sector.
The study has found that Pakistan’s automobile industry is inward-looking and tries to protect itself through the use of regulatory instruments. The CCP recommends that Pakistan needs to develop the automobile industry – currently dominated by only three major players – instead of protecting it. It recommends easing the import regime, saying it will have a disciplinary effect in this regard.
At present, Pak Suzuki is the sole local manufacturer in the 800cc and 1,000cc market segment. In the 1,300-1,800cc cars segment, the state of competition is slightly better, as Honda, Suzuki and Toyota compete with each other to increase their market shares. However, parallel increases and decreases in prices by these manufacturers over the last three years signal a cause of concern from the perspective of competition, the CCP says.
In all three market-segments, manufacturers are sitting on excess installed capacities; and, by not utilising their excess capacities, the firms seem to signal their inward-looking approach towards the domestic industry, says the CCP.
The study also points out a significant cause of concern from the motor safety perspective. In the absence of regulations, domestic automobile manufacturers do not offer safety features such as anti-lock breaking system (ABS), airbags and lower carbon emissions. These are coupled with the absence of quality specifications such as alloy rims, power steering and windows in all their vehicles, the CCP said.
“Dealerships are merely agents of manufacturing companies and have no real incentive to compete in the market,” it said.
Based on its findings, the CCP has recommended various short- and long-term measures. It has suggested that the government remove barriers to entry and lower import tariffs and make them uniform across all automobile categories.
“This will make cars more affordable, push the local assemblers to competition, and incentivise the automobile industry to strive towards international standards and pricing,” it said.
The CCP said it opposes the recent reduction in allowed age limit for the import of used cars from five to three years. “The import of five-year old vehicles provides a better competitive environment in the local automobile industry,” it said. The import of used cars, currently allowed under the gift, personal and baggage schemes, should be reopened according to the watchdog.
The Competition Commission has also suggested that a recently-implemented measure that lowers the depreciation allowance for imported used cars needs to be reconsidered, as it ‘may’ reduce consumer welfare by increasing the price of imports.
Published in The Express Tribune, February 20th, 2013.
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