Local auto industry lacks competitive environment

The competition commission of Pakistan in its report has said that the country’s auto industry lacks real competition.

Competition Commission of Pakistan has submitted 32 pages detailed policy document to the government and had given proposals on the issues prevailing in the auto industry. These proposals are based on the open hearing held on 11 April 2018 on the issue of competition concerns in the automobile sector of Pakistan.

In the report, forwarded to the government, the authority asserted that complaints of quality in products, availability, and pricing of cars is characteristic of an uncompetitive market where the existing auto players are not facing any real pressure that’s why consumers are facing the consequences.

Aside from pricing and quality, long-delivery times is another problem which the local consumer is facing. According to auto policy, if the carmaker doesn’t ship the car to the owner within the assigned time, then it will pay KIBOR +2% as a penalty.

Although at the hearing, the local automaker including Toyota IMC, Honda, and Pak Suzuki asserted that they are paying millions in fine due to late deliveries. However, on the other hand, buyers have been unable to redeem KIBOR plus 2% on late delivery of a vehicle owing to the absence of a concerned authority in this regard, the report added. As an immediate measure to overcome this lacuna, appropriate legislation should be undertaken to implement the penalty and an appropriate government body should be made responsible for its implementation, the report further states.

Read Also: CCP requests govt not to give incentives to existing automakers

The report also said, “ It would not be incorrect to say that a significant portion of deliveries is delayed beyond two months for the three major manufacturers, which is not a healthy sign for capacity and competitiveness in the industry.” 

On the issue of continuous price hike by the local automakers, CCP asserted that “Once customers book a vehicle, whether, through partial or full payment, they have a reasonable expectation that any future price increase would not be applied on them. It is strongly recommended that automobile manufacturers; not apply price increases on customers retrospectively after the booking has been made. Price increases announced by manufacturers should be prospective and only applicable on bookings made after the price announcements are made.”

Drop your thoughts in the comments section below.

Notable Replies

  1. aa78 says:

    Is this all that was covered in 32 pages of the report? There should be detailed discussion on each point of the report/opinion from the perspective of Japanese mafia and the consumers both.

    They have made good recommendations but bribed bureaucracy will put all recommendations in the bin.

  2. This is the summary of the report:

    1. No price change after booking (It has been strongly recommended that automobile manufacturers not apply price increases on customers retrospectively after booking has been made. Price increases announced by manufacturers should be prospective and only applicable on bookings made after the price announcements are made)

    2. Removal of double taxation to allow for supply-push based wholesale automotive market (It has been recommended that the government should consider appropriate changes in the advance/withholding income tax regime, particularly Section 153 and 231B of the Income Tax Ordinance, 2001, to remove double taxation in order to encourage a documented wholesale car market)

    3. Measures for reducing premium/on-money (the issue of long delays in car deliveries from assemblers is essentially due to supply of cars being unable to keep up with growing demand)

    4. Mandatory requirement to pay for new car purchases through pay orders made on the customer’s own account

    5. As an immediate measure to to implement the penalty (KIBOR +2%), appropriate legislation should be undertaken to implement the penalty and an appropriate government body should be made responsible for its implementation

    6. Creation of a national automotive sector standards and safety authority (Federal and provincial governments should work together to create an independent and empowered national vehicle standards and safety authority)

    7. Taxation based on innovation and efficiency (The Federal and provincial governments should consider incentivizing efficient and modern technology by replacing the existing taxation regime based on engine volume, to one that rewards fuel efficiency, lower emissions, and newer technologies. Furthermore, assemblers who import CKD parts of outdated vehicle models/generations beyond 2 years from the global average should be discouraged by charging them higher import tariffs)

    8. Measures to support automotive part venders

    9. Enhancing competition and supply through new entry (Federal and provincial governments should continue to support the timely entry of new assemblers in the market)

    10. Consistency in automotive policy

    Let's hope for the very best, but I fear, practically nothing is gonna happen which proves beneficial in the best interest of awaam.

    Secondly, I could not find any direct / indirect information regarding allowing import of cars on commercial basis, or reduction in Custom Duties, especially on 1001 cc above, Non-Hybrid vehicles, as per my limited knowledge.

    If someone finds it, kindly share.

  3. The Government should ensure that Auto Industry should not increase car prices any further as they are already inflated and alternate incentive (as in case of petrol price) be given to auto industry so that they maintain current price level.

    Secondly, there should be a rule that ONCE A CAR BOOKED AT GIVEN, ANY SUBSEQUENT CHANGE SHOULD NOT BE EFFECTIVE ON OLD BOOKINGS. The effect should be prospective.

    Thirdly, INVESTOR BUYING & SELLING A BRAND NEW CAR ONWARDS should be disallowed. Genuine buyers get delivery time of 6-8 months and the Investors/Dealers are making money on sides and even Salesman supporting those dealers/investors.

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