Tax relief and yellow cab scheme have pushed the automobile companies’ sales upward despite tough circumstances like inflows of imported cars and shortage of imported spare parts, as the industry managed to complete the financial year 2011-12 with highest selling units of 179,000 after four years.
The figures made available said that the automobile sales including cars, light commercial vehicles (LCVs) and jeeps showed growth of 22 percent in financial year 2011-12 as compared to 146,000 units in the previous financial year.
The sales are believed to be the highest annualised sales after four years as last time in 2008-09 total sales were recorded at 187,000 units by the industry. Among the individual categories, cars segment sales surged by a massive 23 percent on yearly basis to 157,000 units, whereas LCVs and Pickups segment sales picked up by 18 percent on yearly basis to 21,800 units.
The sales growth attributed to heavy purchasing of cars deferred in the month of July from June 2011 in which general sales tax (GST) was cut to 16 percent from 17 percent.
The Punjab government’s yellow cab scheme imparted a significant role to drive the industry sales growth as 20,000 units were planned to be sold out throughout the financial year. Whereas 18 percent increase in workers’ remittance that reached to $13.2 billion also contributed towards a record growth of automobile industry.
It is also believed that cars sales jumped up in June in anticipation of rise in prices before EURO II compliance.
Therefore, it has been recorded that car sales stood at 19,000 units in June, which is the highest monthly sales after almost five years. Previously the record sales of 21,000 units were witnessed in August 2007.
Analysts said that automobile sales are likely to continue upward trend in the next financial year, as the car scheme and heavy occasional purchase of passenger cars might not happen again.
It is due to the fact that more than 50,000 reconditioned cars were imported in the current financial year after the government relaxed the age of used car from three years to five years. The high inflows of imported cars not only increased the competition but impacted negatively on the growth of local automakers sales.
The auto sales have been seen on the decline as they stood at 97,000 units in the first half, while its growth was recorded at 82,000 units in the second of half of the outgoing financial year.
The State Bank of Pakistan in its recent quarterly report mentioned that automobile sales in the first three quarters of the financial year slowed down in the current year as compared with previous financial year if the sales number of cab scheme is excluded.
It also said that local automobile makers faced a difficult time during the year as the supplies of spare parts to the country were discontinued for a few months after flood hit Thailand.
Used car traders misusing import facility
The used car import facility under various schemes for Pakistanis living abroad has been misused by used car traders. Although this scheme is for overseas Pakistanis, however, the used car traders purchase the documents against a meagre amount from overseas Pakistanis and indulge in mass imports. These traders make huge profits ranging from Rs 50,000 to Rs 200,000 on the sales of these cars. The transactions are not transparent and without any contribution to the exchequer as no taxes are paid on the profits made by them. These imports are also damaging Pakistani economy as they result in drain of foreign exchange. It is interesting to note that the foreign exchange consumed in import of used cars is twice that needed for CKD operation due to considerable localisation. Also the taxes paid at import stage are fixed amount in dollars, which were determined in 2006, the yen and dollar parity has since changed from 114 yen to a dollar to 79 yen, whereas there is no change in fix taxes in the dollar. Recently, another scam of deliberately importing more than five-year-old cars has been unearthed. These traders in violation of the rules are importing more than five-year-old cars and getting them cleared through fowl means. It has also been noted that in many imported cars, spare parts are also put in these cars.