Economic Crisis? Rs. 259billion Worth of Cars Imported in Just 6 months
Pakistan, a country facing a serious economic crunch and battling to save its precious foreign exchange, has spent $ 1.2 billion (Rs. 259 billion) on importing cars and other vehicles in just six months. The imported transport items include luxury cars, high-end electric vehicles, and spare parts.
CBU/CKD Imports
According to a media report, the country has imported completely built units (CBUs) and completely knocked down/semi-knocked down units (CKD/SKD) worth $530.5 million, which is equal to Rs. 118.2 billion. Although the State Bank of Pakistan (SBP) banned the import of CKD kits by not issuing Letters of Credit (LCs), such kits costing multimillions of dollars are being imported, directly affecting the local industry and their production.
CBU units of buses, trucks, and other heavy vehicles worth $75 million (Rs. 166.6 billion) were imported, while the cost of motor cars was $32.6 million. Under the CKD/SKD imports of buses, trucks, and other heavy vehicles, the imports were $772.5 million (Rs. 161 billion), while the motor car imports were recorded at $498 million (Rs. 111 billion). Last but not least, motorcycles worth $27.6 million were imported during this time period.
The parts and accessories of these vehicles cost $188.6 million (Rs. 42 billion).
Imports in December
The report mentioned that only in the month of December, the imports of the transport sector stood at $140.7 million (Rs. 31.6 billion). Out of this, $47.5 million (Rs. 11.3 billion) have been spent on car imports, $27 million on parts and accessors, $3.6 million on bikes, and $ 25 million on buses, trucks, and other heavy vehicles.
It is pertinent to mention that, despite the weak economic conditions, the government has allowed the import of luxury cars, including electric ones. Per experts, it is one of the primary reasons for the outflow of dollars from the country.
In other reports and data, despite the ongoing economic crisis, the country’s elite class has imported luxury cars, including Ferrari, BMW, Mercedes, and e-tron. Other import numbers show that 43 luxury and 18 heavy bikes were imported in December 2022.
What is your take on the import of luxury cars? Please share your thoughts in the comments section.
Some have suggested that this outflow of dollars by the rich to bring in expensive cars is totally justified and it is their right because they have used their “hard earned” money to do so. If anything, the law which allows them to do this is mostly at fault. If we, the common folk, have a problem with it, we should try to get the rules changed. Here is where the problem lies with such thinking.
The spirit of the law states that all payments, taxes and shipping for the imported vehicles must be made through funds generated from outside of Pakistan and must not be sent from Pakistan to pay for the purchase.
In simple terms, if anyone who has means of earning money abroad, for example they own a business abroad, must use that to pay for the vehicle being purchased and imported into Pakistan. Anyone who falls in that category is fine and is abiding with the spirit of the law. If that is how they are actually importing the expensive vehicles, then more power to them! Knock yourselves out! Have fun!
But, unfortunately the problem lies at the other end of the spectrum. For example, those rich or well-off people who are rich locally with not money sources abroad and are actually sending their money abroad to import their vehicles; that according to the law is not legal, no matter how hard earned their money is. This also encompasses the dealers who are still importing these expensive vehicles to sell to their local rich clientele. They are also working hard to earn their “hard earned” money and then they send it abroad to purchase more of the expensive vehicles. That by law is not legal.
These are the problem areas. That is what needs to be stopped. This must also include the continued rationing of all CKD kits into the country because they too fall under the category of (currently) un-necessary and burden-some spend on the economy.
The reason is simple. Local assembly does not add and/or decrease any significate value of a product. Localization does! In the case of our old three, they had decades to achieve localization. They chose the lazy way out by isolating the market for their own and just selling old obsolete models mostly. Buy low, sell high and completely ignored localization of parts. That gravy train is now coming to a halt and they are quickly realizing they are in trouble. Not because of the current rules but because of their own inability to locally meet any of their requirements. They created this situation themselves. They took a perfectly tradable trade and turned it into a non-tradable one. I.e., no expansion into exports of any kind; CBUs or Parts etc. to bring in any revenue to the country and actually add to the national wealth. Right now, they are only an expense.
Lastly, lets look at some example around us which shows that local assembly actually does not add any true value or reduction in price. In some cases it would actually increase prices. The reason is simple. In order to do local assembly, local assembly plants have to be established with tooling acquisition and the hiring of workers which are just some of the added costs.
Lets look at some of the prices of the vehicles around us to see the difference.
In Philippines, all vehicles brands are vehicle importers. There is no local assembly or manufacture.
Toyota Vios/Yaris Sedan 1.5 (Fully Loaded) = 985,000 Philippines Pesos = 45 lac 30 Thousand PKR
12th Gen Toyota Corolla 1.6 GR-S (Fully Loaded) = 1,300,000 Pesos = 59 Lacs 80 Thousand
7th Gen Honda City S 1.5 = 953,000 Pesos = 43 Lacs 83 Thousand PKR
Civic RS = 1,775,000 Pesos = 81 Lacs 64 Thousand
The prices for these vehicles in Pakistan, Locally assembled:
Toyota Yaris/Vios = 49 Lacs 30 Thousand
11th Gen Old shape Corolla with body kit = 66 lacs 50 Thousand
6th Gen Honda City = 48 Lacs
Civic RS = 81 Lacs
All these prices can very easily be verified online. All official Toyota sites have a very clear price page.
As we can see, all the prices are lower in the Philippines for newer cars and are just about equal in the case of the Civic RS. The glaring question is: What, if any, are the uses of local assembly?
If local assembly leads to localization, that is where the benefit is. If it stagnates, like it has done in Pakistan, it leads to being a burden on the economy.
So, this message of “their money to do with as they please” that some use to justify the extravagance of the few; No! I do not agree that. They only must import if they meet the legal criteria. Also, even if they can import just because they have the money; being Pakistanis, is it worth the damage to our nation just to satisfy fragile egos?
I know I have had to summarize a lot here because it is getting very long but I hope this delivered the message. Blame shifting is not the answer. Responsibility and accountability are.
“It’s easy to fool people when they’re already fooling themselves.” Lets be responsible and NOT do this.