Used cars: Uncertainty remains over reduction in age limit for imports

Earlier decision allowing import of 5-year-old cars apparently taken back.

KARACHI: Car manufacturers and importers face uncertainty in the absence of a government notification reducing the age limit for import of used cars to three years from five years.

Prime Minister Yousaf Raza Gilani was quoted by a small section of media as saying that the government wanted to withdraw its earlier decision allowing import of five-year-old cars. On December 8, the government had increased the age limit for car imports from three years to five years, meeting a longstanding demand of dealers and countering hikes in domestic car prices.

The prime minister’s statement was shocking for car importers who were busy buying vehicles in Japan, the UK and Thailand.

All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad said “the government has not issued any notification revoking its earlier decision that increased the age limit for imported cars from three to five years.”

Uncertainty prevails because the government has abruptly withdrawn from its previous move, he said, adding importers would face losses as they already have purchased cars worth Rs5-6 billion after the announcement.

Car manufacturers also said that until the government releases a notification the situation will remain unclear.

Indus Motor Company’s Director Marketing Raza Ansari said “the government has not issued any notification on reducing the age limit for car import so we cannot assume anything. We need to wait until an SRO is issued.”

In addition to imports, the government has hinted on many occasions that it has invited new car manufacturers to invest in the country by easing conditions for them.

Replying to a question, Ansari said “we are not afraid of new players coming into the market instead we will welcome them as it will create jobs in the country.” But at the same time, “we want a level-playing field from the government.”

He said competition is healthy and the company has preferred manufacturing in the country instead of imports which only create jobs in other countries. A couple of days ago, Indus Motor reduced car prices in the range of Rs15,000 to Rs40,000 for different models. Discussing that, Ansari said the company invested Rs1.5 billion recently in engine assembling to increase localisation and now it has reduced car prices to pass on the benefit to customers.

JS Global Capital analyst Atif Zafar said the government wants to encourage new car manufacturers to enter the local market in an effort to increase competition and bring down prices.

Although Chinese Prime Minister Wen Jiabao during his recent visit to Pakistan came with investors and Pakistan also sought Chinese investment, it seemed difficult that new car manufacturers would invest in Pakistan, he said, adding the government had already reduced minimum car manufacturing limit to 100,000 units a year in June 2010.

“But at present there is no progress on this front. It is difficult for new players to invest here because of low demand for cars,” he said.

Local car manufacturers have also not been running on optimum capacity due to weak demand in recent months, he added.

Published in The Express Tribune, December 31^st, 2010.