'Under-invoicing of imported used cars rampant'
SIKANDER HAYAT
ISLAMABAD (March 03 2006): Under-invoicing of imported used cars is rampant, a senior official of the Indus Motors Co said here on Thursday, adding that unrestricted imports of the same also tends to seriously jeopardise the growth of the national automobile industry.
The under-invoicing is so 'massive' that there is an instance when a slightly used Mercedes Benz was priced at $5,000 (approximately Rs 0.3 million) which is much less than even half of its market price, Indus Motor Company Ltd CEO Parvez Ghias said at a media briefing. He also cited import of used Prado vehicle, which has deprived the national exchequer of about Rs 1.5 million as duty per vehicle. On an average, 3,400 used cars are being imported every month.
The import of used and new cars was allowed in the current budget in the wake of growing criticism of local manufacturers who had failed to ensure delivery of vehicles in time and on fixed prices. But ironically, bulk of cars being imported are mainly luxury brands in sharp contrast to the sentiment that ordinary citizens should benefit from lifting of ban on imported cars.
In the seriously under-motorised Pakistan every 1,000 people have eight cars, against China's 10, India' 12 and Iran's 23. Only a robust local manufacturing capacity can enhance the per capita motor density, but the problem is that the government has drastically lowered import tariffs, he said.
Such a move defies the logic: You want to be a car-exporting country, like India, Thailand and some others, but has allowed easy and cheap imports that hit the financial viability of the local industry. As against India and Thailand where CBUs are subject to 100 percent and 80 percent duty, respectively import duty in Pakistan is between 50-75 percent.
The IMC official proposes upward revision of tariff to provide protection to the local industry, including duty on spare parts, which are manufactured in Pakistan be fixed at 50 percent, (2) other than those be imported at the rate of 35 percent, (3) CKD imports be fixed at 32.5 percent, and (4) raw material used in manufacturing of the parts be placed at 5 percent duty.
Thanks to 30 policy changes during the short span of seven years (1994-2000) the automobile industry of Pakistan suffered a stunted growth, with annual production being just about 10,000 units. But auto financing introduced in early 2000 triggered a massive demand for cars.
Copyright Business Recorder, 2006