Age of the imported car: 5 years or 3 years?

The debate about the age of the imported cars have been continuing for the last one year where the OEM’s are pushing the government to reduce the age of the car from  5 to 3 years whereas importers want the government to stick with the current policy. Both the stake holders have their own point of view and arguments to support their cause. Let us review the point of view of both the parties and suggest some solution to the problem in which both the parties should come out with a win-win situation.

OEM’s manufacturing cars in Pakistan are working since 1982 when first Suzuki rolled out of the production line. Since then, Pak Suzuki has produced more than one million vehicles. Toyota and Honda followed Pak Suzuki and set up manufacturing facilities in 1990 & 1992 respectively. All these 3 companies have contributed significantly in developing local vendor base which has resulted in development of manufacturing industry of Pakistan.  It is estimated that the total number of auto-parts manufacturers has exceeded one thousand and providing jobs directly or indirectly to over 200,000 persons. The auto parts manufacturers have contributed significantly to indigenization of the locally assembled vehicles as well as in development of the engineering/industrial capabilities. Massy Ferguson and Fiat Tractors have been indigenized to 87%, various models of Suzuki vehicles from 30% to 65%, Hino & Nissan trucks 40%, Mazda trucks 35%, Honda and Toyota cars 28%, Honda and Yamaha motorcycles 80%. (Source: PAMA)

During all the years the industry was protected by the government by not allowing imported vehicles. This resulted in monopoly of local manufacturers and the people were forced to buy locally made cars with poor quality at exorbitant prices. Even the customers were made to wait for 2 months after depositing advance payments to these companies. The situation changed after Pakistan became signatory to WTO which requires level playing field for all the players. Subsequently duties were reduced and import of vehicles was allowed with age limit of 5 years in 2003-4 under three different schemes. The arrival of imported vehicles raised the customers’ expectations since features like power windows, power steering, ABS brakes, air bags they all come as standard in imported cars. The same situation is prevailing right now. The local manufacturer’s especially Pak Suzuki does not seem to be willing to introduce new models with new features; instead they are again trying to sell their obsolete models by restricting the imported car’s age to 3 years.

In my opinion the government should adopt a balanced policy by creating the level playing field for both players keeping in view the interest of consumers as well. The age of the car can be reduced to 4 years or the import duty can be increased a little bit without changing the car limit. This will help our local industry to become competitive in price, in comparison to imported cars which are currently selling at lesser price than local cars, hence ensuring job retention for thousands of workers.

On the other hand if the government reduces the age limit to 3 years the imported cars will become expensive and the local manufacturers will again get a chance to sell their obsolete models with advance money at premium prices. So a healthy competition should remain there, otherwise quality of locally produced cars will not improve and the consumer will not get maximum value for their money.

P.S. A company like Honda with a brand like Civic has been forced into design change only after 20 months of its launch. Reason: Tough Competition from competitors like Hyundai Elantra, Chevrolet Cruze, Ford Focus etc.