Existing car manufacturers are lobbying to impose ban on used cars which could lead to further increase in prices. PHOTO: FILE
The government is considering introducing a tariff protection plan for new entrants in the automobile manufacturing sector in auto policy 2013, to break the monopoly of existing players.
“We may give tariff protection for five or seven years to new entrants in the auto industry to break the monopoly of existing players who are fleecing consumers by selling vehicles based on obsolete technology at high prices,” sources said, adding that the government now wants to create an environment of competition by bringing more auto players in Pakistan which may result in decline in vehicle prices.
Officials said that other countries had many players in their auto industries, because of which prices are kept low, unlike in Pakistan where due to the controlling share of a few players prices are generally high. He said that the government had introduced a policy for new entrants in the motorcycle industry, and had a plan for car manufacturers which will bring new investment in Pakistan.
The government decided to introduce a new auto policy after it noticed that despite enjoying incentives from the government, car assemblers continue to sell at high prices. They are also earning hefty profits on the advance deposited by consumers before their cars are even delivered.
In a meeting held on October 2, the Economic Coordination Committee (ECC) of the cabinet criticised car assemblers, saying they had been getting incentives for several years but did not meet the commitment to the government.
The meeting was told that an auto policy was being formulated and its first draft was ready. The ECC, however, stressed that the draft should be based on a thorough review of the facilities being offered to the auto industry, the need for new entrants, existing duty structure for import of motor vehicles, standards set by the Engineering Development Board, and should meet requirements of a long-term policy framework. The draft should also take into account proposals from the assemblers, dealers and vendors of the auto industry, it said.
The ECC decided to constitute a committee comprising the minister of water and power, chairman Board of Investment, chairman Federal Board of Revenue, industries secretary and chief executive Engineering Development Board to finalise the policy draft within 45 days and submit it to the committee.
Official said that the committee was considering different proposals and a meeting would be held soon with stakeholders to give final shapes to the new auto policy.
Existing car manufacturers are lobbying to impose ban on used cars which could lead to further increase in prices. However officials said that the government had no plan to impose a ban on used cars.
He said that car manufacturers had been earning huge profits on the advance money deposited by consumers. Now, the government is working on a plan to reduce time of delivery so that consumers are not exploited.
The apex economic decision-making body in its meeting held on October 2 had expressed concern that the car assemblers were exploiting the consumers as they were unduly keeping the latter’s advance for several months and earning profits on that before actual delivery.
The ECC took notice of negative growth in the automobile sector, which had not been recording any growth for many years notwithstanding a host of incentives provided by the government.
Not a single car manufacturer in the country had been able to complete its deletion programme even after extension in the timeframe. Moreover, the meeting noted that products of the assemblers were costly and based on obsolete technology.
Published in The Express Tribune, November 15th, 2013.
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COMMENTS (11)
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@Manish: Oil imports make up the lion's share of our import bill. A car consumes more petrol during its lifetime than the initial cost of purchasing the car. That is the big mistake you are making. You think that the one time big purchase of a car will be worse than the little purchases of fuel that add up over the lifetime of the vehicle. That isn't the case. Fuel costs more than the car itself!
As far as fuel efficiency goes you should know that imported, used k-cars from Japan are twice as fuel efficient than the local varieties. Twice as fuel efficient!
I am not saying that we should allow complete, unrestricted imports so talk of a local manufacturing collapse is unwarranted. All I am saying is remove some of the barriers to trade to stimulate competition that will lead to a better local industry as well as help the nation's consumers.
@abdussamad: Wrong, Import of cars means further depletion of Foreign Reserve which are already too less to sustain a few months of import. The oil demand will never go down, not now , not in atleast 30 years. It never goes down in an economy which is targeting growth. Further import of cars will result in more trade deficit, as you may be aware that IMF now requires Pakistan to have a certain minimum level of foreign reserve its not even an argument to discuss. The imported cars with no matter how good the tech will consume only marginally less oil. No significant impact. However opening up economy means inviting foreign players into the market, who will invest in terms of millions (very much possible) and billions (if security situation is better) in building manufacturing units. Manufacturing units means hundreds of related local ancillary units around the parent factory. This ultimately means jobs and a better economy and who knows, you can export cars in future. Export is the ultimate solution to higher foreign reserve with which you can finally buy oil , fund the Iran Pakistan Oil pipe line and so many other things :)
@Dhaka: Bangladesh is nota manufactyrer.. u people only import
I would say that our local production of auto industry has done no favor to this nation other than fulfilling the pockets of a few people who run this industry. It is more of a mafia rather than an organization. Importing cars will not only balance out the equilibrium but will also boost the auto parts industry in Pakistan allowing the Pakistani people to do business and earn money.
@lahoree: I'll tell you the impact. It will mean a gradual reduction in our oil import bill and free up gas for more productive uses than CNG for transport. Why will imported cars have these benefits? Because imported cars are based on modern technology and consume a lot less fuel so you can run them on petrol without breaking the bank.
Right now the entire nation has been held hostage by these local assemblers. Our oil import bill is too high because of them and we have to use CNG because we can't afford petrol and I don't have to tell you the state of CNG in Pakistan.
Why can't pakistan import cars from bangladesh, it will be much cheaper than other foreign cars.
@abdussamad Disagree. Importing is never a good option. must study import impact on economy.................
Good move, this will introduce other manufactures and lower prices. At least the common folk can buy a car that's worth it money.
Moral of the story? Another briefcase/s full of cash is required by the govt to continue allowing the local manufacturers to fleece customers.
This is the wrong policy! No new entrant is going to invest in Pakistan because our market is too small. If you want to break the stranglehold of the local assemblers you have to allow the import of used cars up to 5 years old and not change that policy under any circumstances (meaning not on the payment of huge bribes like last time). That will give the local lot a kick in the pants to improve their products and lower prices.