IMC urges the government to provide incentives to local auto parts manufacturers
Indus Motor Company (IMC) has urged the government to provide incentives to the local auto parts manufacturers so that the new entrants may prefer purchasing of localized parts instead of the imported ones.
The Message from Swat
An auto workshop was held in Swat where the Indus Motor Company’s Chief Executive Officer (CEO), Ali Asghar Jamali presented the demand for relaxation in duties to the local auto parts manufacturers. The raw material for the manufacturing of local parts is not available in the country due to which it is imported from other countries. The auto sector pays regulatory duties from 1%, 10%, and 20% on the import of this raw material, components of parts, and sub-assemblies of cars respectively. These regulatory duties are imposed under the Automotive Development Policy (ADP) 2016-2021 and SRO655.
On the other hand, the original equipment manufacturers (OEMs) pay 46% duty on the import of localized parts whereas the new entrants in the auto industry pay just 25% duties. Therefore, the government needs to take the necessary steps to ensure that all new entrants prefer the purchase of local parts rather than importing them.
Suggestions from IMC’s CEO
IMC CEO said that they believe in the localization of vehicles and Automotive Development Policy (ADP) 2016-2021 has contributed immensely in bringing new players in the auto sector of Pakistan, thus increasing the competition level in the local industry. He further suggested the government to reduce the duties on the imports by 50% which would result in encouraging the new players to purchase the auto parts manufactured in Pakistan.
While appreciating the government in bringing a handful of competitors in the local industry with the inclusion of new entrants, he said that it offers more choice to the consumers to decide which brand suits their needs. It also creates a wave of high-level competition among the companies in providing the best value for money to potential buyers. He believes that IMC has a considerable advantage over all other new entrants due to the company’s achievement of high-level localization of parts. Toyota promises its customers with ‘Quality, Durability, and Reliability’ which would help the brand in staying at the top of the completion.
However, there is a need to support the local engineering base and enhance the employment ratio for which incentives to auto parts manufacturers would be a great step in the right direction. Mr. Jamali believes that the local industry has a massive potential to flourish but needs the implementation of right policies.
Toyota Procures Locally
While highlighting the manufacturer’s commitment to localization, he briefed that IMC has already arranged 35 technical assistance and technology transfer agreements between several local vendors and their counterparts across the globe. Since 2004, IMC has so far localized 170 parts, which is an achievement. Furthermore, the company is procuring local parts worth more than Rs.200 million on each working day of the year.
He further explained that while considering the high rising demand for cars in the country, the company has increased its production capacity by 20%. A hefty amount of nearly $126 million has been invested by IMC for the introduction of the model and further improvement in the production of cars.
Toyota Records Positive Sales
As a result, the last financial year recorded an increased production of 66,000 units than the previous number of 54,800. The contribution of the auto sector to the GDP of the country is currently standing at just over 2%. Moreover, the local auto industry has a direct and indirect employment of 0.3 and 2.5 million people respectively.
While answering a query related to the recently imposed 10% Federal Excise Duty (FED) on locally manufactured vehicles of 1700cc and above engine capacity, he accepted that it would certainly reduce the number of sales for vehicles falling in this engine capacity category. It would largely impact the sales of Toyota Grande and Fortuner and Honda Civic in particular.
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