What’s the duty on your car and who is responsible for the high prices

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We’re led to believe that the automakers’ are the first culprits in jacking up the prices of the cars so high but we’d be wrong. The government with no sight of a steady and flourishing economy, has to find ways to gain revenue to keep the system running and pockets hot.

The Honda Accord that was launched just yesterday is a tremendous car, it has won awards and praise from anyone that has driven it, in its own category of course. However here in Pakistan, it is so expensive that it’s existence is rendered completely pointless. But Honda Atlas isn’t to be blamed for the exorbitant price, the government charges an unbelievable 4,529,081 rupees on the car as duty and couple that with a sinking rupee against Japanese yen and U.S. dollar, the price is way beyond comprehension.

On the other hand, U.S. only charges 2.5% duty on cars, while trucks are charged at 25% and motorcycles at 2.5% or free as well.

You may argue that U.S. is a developed economy and so on but, they have allowed competition and volume, and consumers the protection of many many options to choose from. They could limit their country with only three cars like us and ask millions as duty on it but that would limit economic progression.

If they introduce a similar duty structure like ours, almost all the manufacturers would have to shut shop as people will no longer be able to afford cars and millions of jobs would be lost.

With such a stupid duty structure, no automaker wants to come in Pakistan. The duty structure renders their cars pointless and limits the number of buyers they could have.

Automakers around the world are attracted by volume, they set up plants and become part of an economy if the market is capable to offer impressive volumes.

Today, we only have three auto assemblers who don’t even completely assemble the cars locally and yet they have created thousands of jobs and generate a lot of revenue for the government. Imagine what could ten or twenty or thirty automakers would do? But with this type of duty structure, it isn’t possible.

We are not suggesting reducing duties on imported cars, that is a sector that should be limited and instead, automakers should be welcomed in the country with less then 10% duty on cars they produce here.

While speaking with Dawn, Ali Habib, Chairman of Indus Motors said that a hybrid car can cost $20,000 and the fuel saving it gives is about 800 $, “The revenue loss and the forex drain implied by the scheme is far larger than any savings that might come. So I don’t get what the intended outcome is.”

As per the duty structure that is attached below, duty to be paid on a normal petrol 1000cc car is 514,140 rupees with 5% depreciation while it is zero on a 1000cc hybrid.

Duty on a 1300cc car with 5% depreciation is 1,028,280 rupees and only 514,140 rupees on a 1300cc hybrid whereas the duty on 1500cc car is 1,439,592 rupees and 719,796 on a 1500cc hybrid.

Duty on a 1800cc car with 5% depreciation is 2,159,388 rupees and 1,079,694 rupees on a 1800cc hybrid.

There are almost none reputable 1000cc and 1300cc hybrids while there are few 1500cc hybrids and the most popular, Toyota Prius Hybrid is a 1800cc car and duty on that is just massive.

Click on the images to enlarge:

duty_list_13062013.xls-page-001  duty_list_13062013.xls-page-002duty_list_13062013.xls-page-003

 

 

 

 

 

 

 

 

 

If we could learn a lesson or two from other countries, or even businesses, we could offer automakers less then 10% duty on the cars they make here and earn revenue from countless other sources that would be created from their operations.

Joint-ventures, transfer of technology, like China has done that all automakers can produce vehicles with joining hands with a local company and must transfer technology by creating new local sub-brands can give us massive edge creating jobs, revenue and many other industries and what not.

I am no economic expert but this is how United States is able to finance the largest defense budget in the world, but only if we want to expand our perspective from short-term to long-term.

Your feedback is important, do let us know what you think and if you have any more ideas.

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15 Comments
  1. Hamid Wajid says

    I think yes they should allow new automakers to produce in pakistan

  2. Guluna Sheheryar says

    US is free market economy. Where the market drives the economy. While ours is a strictly regulated in fact draconian economy.

  3. Mamoon Azam says

    Nissan Leaf is not a Hybrid. It is an all electric car.

  4. Ch Sami says

    The local industry try their best to stop the import of hybrid cars because of their monopoly in Pakistan.

  5. Omer J Pal says

    Well Prius comes both in 1500 and 1800 cc and not only 1800 cc dear author.

  6. Ali Khalid says

    new model of prius is 1800cc. 1500cc was the old one. so prius now is just 188cc

  7. Osama Javed says

    So whats the current duty on civic or prius hybrid?

  8. Osama Javed says

    And whats was the duty on prius before?

  9. Rayan Ihsan says

    If Government sign Joint ventures & Transfer of technology today. How long would it take to start manufacturing auto-mobile in the country?

  10. M Tanveer Khan says

    Love this article. Thanks khan

  11. Muhammad Saad Saleh says

    Aur kuch

  12. Muhammad Irfan says

    hybrid cars required lots of power, its not successful even in 1500cc cars.

  13. Abdul Sattar Khokhar says

    Whosoever has written this article needs to see how the car OEMs in Pakistan fight tooth and nail to keep the car prices high. Government is pressurized into keeping the taxes high through negative ploys. I would cite the example of Camry.. Indus is importing the lowest spec model of this car, and while it can easily sell this car @ Rs 4 million, it sells the "glorified corolla" for Rs. 9.7 million. Last year, they sold SIX camry cars in Pakistan. Can you see the point? High price of Camry makes it least attractive for purchasing by customers…

    If somebody still insists that government taxes are high for Camry, just look at the prices of E Series Mercedes Benz imported and marketed by Shahnawaz…

  14. Sardar Zahid Shuja says

    govt is looting public with high duties. this is highway robbery.

  15. Rehan Sarwar says

    Is it just me or there is a huge flaw in your logic? You're talking about Accord, Camry etc. all of these cars are imported. The duty you're talking about is the "import duty" that keeps their prices high to give an incentive to people to buy the locally made cars. Am I wrong in assuming that there is no import duty on locally made cars? (except of course the duty they pay on the parts they import for assembling).
    You're mentioning in your article that you're not talking about reducing duties on imported cars and in the next sentence you're bemoaning the fact that Accord is very expensive because of the import duty. What is it exactly that you're trying to say, my man?

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