Business

Auto policy to promote car financing schemes

Industries ministry, FBR to discuss tariff rates on parts import soon.

Peer Muhammad March 03, 2015

Under the new policy, for the first time in five years, a 10% import duty may be imposed on both localised and non-localised parts of completely knocked-down (CKD) kits as an incentive for the new auto players. STOCK IMAGE

ISLAMABAD:

The much-desired new automobile policy is at advanced stages of completion and is likely to bring major incentives for encouraging fresh investment, promoting car financing and reducing duties on auto-part imports.

The draft is near completion and the Ministry of Industries and Production would soon hold a meeting with officials of the Federal Board of Revenue (FBR) to finalise tariff rates on the import of localised and non-localised car parts, a key policymaker at the ministry told The Express Tribune.

“We are finalising the new policy keeping in view the interest of both manufacturers and consumers,” the official remarked. “The meeting with the FBR will be held this week or next.”

The key objective of the policy is to attract higher investment in the industry with the help of incentives to the investors, reduced sales tax and introduction of car financing schemes.

“Only the investment incentives will not work; we need to come up with consumer financing schemes for the lower income group, particularly the people who use cars of 800cc engine capacity or below,” he said.

In the draft policy, priority is being given to the manufacturers of small cars with the offer of 2-3% reduction in sales tax. “This will increase the demand for small cars and lead to a rise in their production,” the official said.

The government is considering curtailing import duty by 22-40% across the board on localised and non-localised car parts for the new players in the industry in a bid to break the monopoly of existing manufacturers.

At present, the import duty on non-localised parts is 32.5% and 50% on localised parts of all kinds of vehicles including cars, trucks, buses and tractors.

Under the new policy, for the first time in five years, a 10% import duty may be imposed on both localised and non-localised parts of completely knocked-down (CKD) kits as an incentive for the new auto players to create an atmosphere of investment and competition.

At present, hundreds of thousands of motorbike riders are waiting to switch to small cars, but the huge price difference between motorcycles and small cars is a major stumbling block.

“Our policy recommendation to the government is to offer a demand-driven consumer financing scheme for the low-income consumers to not only give a boost to industrial activities, but also facilitate the lower-income class,” said the ministry official.

The government is also expected to focus on consumer welfare in the manufacturing of new vehicles by ensuring quality standards in line with the international practices as well as ensure a swift delivery system.

Published in The Express Tribune, March 4^th, 2015.

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COMMENTS (2)

Usman Ansari | 9 years ago | Reply I find it funny that the government is only now focusing on consumer welfare to bring local cars in line with international standards. My sister had a mid-level Corolla in the US in 1998. It had four (4) airbags and anti-lock brakes as a standard. Mind you, a Corolla in the US is the SAME PRICE as a Corolla in Pakistan, so it is obvious that local manufacturers have a much higher profit margin than American producers. Anyway, seventeen years later, and even now airbags are only available for drivers' side only...and that too in the top of the line Altis. Pakistani made cars are overpriced pieces of garbage compared to any other country in the world. If the government was actually interested in consumer welfare, they would mandate that local manufacturers comply with international standards in their entirety. Until then, the closest thing to international standards is the Honda Civic, so I'm stuck with only one option.

Sibtain | 9 years ago | Reply There will be no new entrants given the security situation in the country. They need to ease up on used car import restrictions. That is the only way to increase competition in the market. This new policy looks to be the work of the local assemblers' lobby. They've sent the government in a direction that they know will not yield any results.

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