After long-standing economic challenges hurting Pakistan’s car industry, the local car vendors have come up with another one. And this time, they are complaining about the increased influx of used cars in local market shattering already dwindling car sales.
As per the media reports, the auto sector vendor has urged the incumbent government to steer used car policies in a different direction in the upcoming budget.
The Concerns
Suffice it to say, they have advised the federal government to maintain strict duties on the import of used cars as the loss to the country’s economy has reached Rs. 50 billion in the first eight months of the current fiscal year.
Marking a whopping 641% surge in used cars, the reports have informed that the number has reached massive 25,000 vehicles during the first eight months of fiscal 2023-2024 against 3,386 units in the corresponding period of last year.
The Root Cause
Concerning the issue, the car vendors hold favorable tax and duties responsible for the ongoing whammy observed in the industry when the previous import restrictions leading to a series of production cuts have already made the things unfavorable for them.
They also pointed out that worrisome grey market transactions for used car imports pose a more significant threat than legal transactions for local manufacturers, leading to potential revenue losses for the economy.
Our Analysis
The vendors’ concerns are certainly valid, but they need to understand why customers are being drawn to imported cars. From the customers’ perspective, why wouldn’t they buy a car that is reliable, fully loaded with features, has excellent build quality, and offers good mileage for Rs. 3.0 to 3.5 million? In contrast, most of our CKD vehicles fall short in these areas.
Earlier, the Overseas Investors Chamber of Commerce and Industry (OICCI) has advised the federal government to maintain strict duties on imported cars. According to the media reports, OICCI’s recent budget proposals underscore the need to continue imposing regulatory and additional customs duties on these imports.
What do you think about the car vendors’ concern pertaining to the import of used cars? Drop your thoughts in the comments section.
This is simply one type of Importer trying to get the other type of importer banned.
The local assemblers and by extension their parts vendors and their propaganda will have us believe that they are heralds of the auto industry in Pakistan. However, that is far from the truth.
If the parts vendors and auto assemblers claim they “are producing 60% local parts”, where is the export benefit from that substantial local parts production? The auto industry of Morocco with around 60% localization, brought in over 8 billion dollars of profit to their nation in exports. So what have our cheetas done in their over three decades of existence in Pakistan and their “60% localization”?
Instead of exports to foreign markets, didn’t the local Japanese car companies just sue the country for wanting them to have at least 10% of their production geared for exports in the next two years? After thirty years in Pakistan, when they are asked to do something that will REALLY benefit the nation and not just have them importing parts for local assembly, they sue the country instead!!! WOW!!! great work ethic! great benefit to Pakistan! You are “doing your nation proud!” 🤦♂️😡 The sad part is, the local auto assemblers themselves admitted that what they produce in Pakistan is far from international standards and are older models.
Let us also acknowledge markets such as Bilal gunj, sultan ka khoo, Shoba and the myriad of others all over Pakistan which are the life blood and true job providing centers and skill teaching centers of the Pakistani auto industry; mainly supported by the same “grey” imports these idiots are trying to ban. More people buy kabali parts even for their locally assembled vehicles than buy the over priced parts from the dealerships. So don’t give us the argument that used imports are “hurting the economy”. They are helping it a lot more than these big companies ever will.
Also the tax generated by the used car imports was substantial, a fact that was admitted by FBR when the used car imports were first curtailed substantially in 2018. Just think, these are usually cheap imports from japan. Many times, the tax paid to Pakistan on these imports is greater than the price of the imported cars themselves. And then people pay tax and registration fee to get them road legal. That tax revenue was substantial from the use car imports.
The local companies on the other hand only mostly assemble cars here. We all know they still only make cheaper parts here with the bulk of the more expensive parts all imported. On top of all that, they have to support workers, staff and factories here as well. Ask any good economics student and you will get the same answer that locally assembly without exports is the lowest rung of localization which often adds costs rather than decreases them. We see this clearly here. The used car import are much cheaper for the nation and better for tax collection. And local companies which have been in limbo in this country for over three decades, with marginal localization and no presence in the export market and when asked to increase their presence in the export market (a very common and reasonable request under any tread law) they sued Pakistan rather than comply. These companies, by the way, are doing exactly the same and complying with these same requests from nations like India, Thailand, Indonesia, Morocco, etc. and increasing their export. But in Pakistan they just sued the nation for no reason (other than badmashi I think).
So this is no more than a case of the pot calling the kettle black and one type of importer trying to get another type of importer banned to corner the market. The nation and any benefit to it, don’t even factor into their greedy agenda!