The recent fiscal budget 2024-25 has not only inflicted additional taxes and duties on vehicles but has also irked the local makers. The reason behind this episode is not new – same old concerns regarding tax exemption for small imported cars.
In Finance Bill 2024-25, the incumbent government inflicted a 15% regulatory duty (RD) on the import of used cars exceeding 1300cc, omitting the segment below 1300cc engine capacity. Interestingly, this section has annoyed local car makers.
| Engine Capacity | RD on Hybrid Cars (%) | RD on Petrol Cars
(%) |
| 0-1300cc | – | – |
| 1300-1800cc | 16% | 16% |
| Above 1800cc | 15% | 70-90% |
In a letter to Prime Minister of Pakistan Shahbaz Sharif, Pakistan Automotive Manufacturers Association (PAMA) has raised concerns by highlighting the data for the period of January-May 2024, narrating that about 62% of imported of use cars belong to below 1300cc.
The Recommendations
However, PAMA also proposed some recommendations:
- Impose a 15% regulatory duty (RD) on the import of cars with engine capacity below 1300cc while maintaining the current rate of newly imposed RD on vehicles exceeding 1300cc engine capacity.
- The continued use of SRO 577 (I) 2005, last updated in 2015, leads to substantial revenue loss for the government. Taxing based on outdated values is no longer sustainable. A revision to reflect prevailing market prices is necessary.
PAAPAM’s Letter
In addition to PAMA, Abdul Rehman Aziz, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), has also expressed his apprehension, saying that the government would take measures to curb the illegal trade of used car imports. However, the recent budget 2024-25 has disappointed us.
He said 70% of used car imports consisted of vehicles below 1,300cc, which are, unfortunately, exempt from the new regulatory duty. According to Mr. Aziz, Pakistan’s auto industry was bracing for a total sales volume of 135,000 units. However, he expressed concern that 35,000 units, or roughly a quarter, would be imported used cars.
This influx of used vehicles, exempt from the new regulatory duty for smaller engines, is blamed for impacting sales of locally assembled cars and leading to job losses in the sector. Mr. Aziz claims that over 50,000 Pakistanis lost their jobs in the fiscal year 2023-24 due to this trend.
Earlier this March, before the Finance Bill 2024-25 was proposed, local vendors and car assemblers voiced similar concerns, highlighting how the surge in the import of small cars is casting a pall over them.
What do you think about the RD imposed on cars above 1300cc exempting small imported used cars from it and concerned voiced by local car makers? Tell us in the comments section.
The matter of fact is that there are very little new car models below the 1300cc mark by the current auto assemblers which are these days more focused on launching expensive SUV type models. The middle class can only afford a car on average of below or equal to a 1000cc. The only choice is to buy Suzuki offerings while the other auto assemblers shy away from any competition in this segment.
So with Suzuki having a monopoly, and other vendors shying away, its good that the Government did not tax this segment so that the middle class can have atleast some relief from the exuberantly priced local models.
This is a simple case of one type of importer trying to stop the business of another type of importer.
Used car imports are a very good source of tax income for the nation. Stopping that will be very bad for the nation. Used car imports also provide and produce a lot more jobs than these local assemblers ever will admit. Go to any big car market; all are operating mostly from providing parts for imported cars. These imports also provide somewhat affordable and up-to-date technology vehicles for the common man.
Instead of crying and trying to gain very questionable sympathy votes by saying how many jobs will be lost (sounds more like a threat!) The very pertinent question that must be put to these local auto sector gurus is, in the decades that they have been operating here, why have they never entered the export market fully? If that had been done they would now be telling us of the jobs created instead. Wouldn’t that have been something?! Why has that not been done but instead they are almost threatening firing workers!
If after three decades of their presence in the market, a mere 30K units of imported cars (which are mostly not even made by these local assemblers because they themselves say “there is not profit in it for them”) is threatening to being their businesses down, then the existence of such a sector of industry is very questionable and is a net Burdon on us as a nation.
Instead of stopping the imports, the future of this failing and burdensome auto sector must be fully scrutinized/analyzed.