Pakistan’s local auto Industry is passing through one of its worst phases, especially for the last year. There are no Letters of Credit (LCs), problems in importing raw materials, and the dollar is volatile against the Pakistani rupee leading to critical steps like shutting down production plants. Amid this, there is a forever debate whether the locally assembled companies are providing specs and features worth their car prices or imported used Japanese cars are a better option. The ongoing debate has supporters on both sides, and the very topic came under discussion during a recent podcast hosted by our very own Suneel Munj with famous economist Ali Khizer as guest.
Should it be Completely Closed?
During the discussion, Suneel highlighted that countries like Australia and some in Africa realized their consumption is less, so they decided not to manufacture locally but rather import them, both new and used. In the context of the current situation, the common person’s income and production plight, is there a case of the auto industry in Pakistan, or should we solely focus on import? Suneel asked.
Answering the question, the economist said that it is a complicated question. “We have seen in last 30-40 years that two companies in Big3 haven’t localized the manufacturing and in the case of Suzuki, there is localization, but it imposes transfer pricing meaning it sell the imported car parts to the consumers,” Khizer mentioned, adding that the new companies are doing the same.
He further stated that the companies haven’t been able to scale up the business with no chances of exporting because the number of assembled cars is not much high. “The only primary argument these companies present is that a single car creates five jobs, but pertinently, three out of these five are aftermarket jobs,” Khizer said, adding that these jobs can be shifted to car imports and moreover, the government should announce that in the next 4-5 years, the duties and taxes on import and locally assembled would be similar which would ultimately create an atmosphere of equal competition. “These companies haven’t given much to the consumers in the last 4-5 decades,” he asserted.
The Other Point of View
Countering the argument, Suneel highlighted the inconsistency in policies for the auto industry. “We compared ourselves with India, but they stood by their locally manufactured car for years while in our case, every government comes with its own policies, i.e., one government focuses on promoting locally assembler cars while the next believes the import of used cars is good, directly harming the whole sector,” he mentioned.
“Just opt for one policy and standby it no matter whose government it is,” Suneel concluded. You can listen to this discussion in this video from 25:53 onwards.
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What is your take on this discussion? Should the local auto industry be shutdown or not? Please share your thoughts in the comments section.
