KARACHI: The local automakers have rejected the importer dealers’ proposal for the Trade Policy 2011-12 to allow commercial import of up to ten-year old used vehicles that could be detrimental for the domestic auto industry.
According to sources, this proposal is based on the pretext locally assembled cars are priced very high. Furthermore, the association believes the import of used vehicles is beneficial for the government as it will increase the tax net and expand the tax base.
However, this approach to fiscal policy neglects the potential harm caused to the local auto industry and through it to the national economy.
The local auto industry has been greatly beneficial for the local economy-fact that cannot be over emphasised.
The importance of the local auto industry can be gauged from the contributions the auto sector has made to the national exchequer, which amounted to approximately Rs 68 billion during 2009-10 whereas passenger cars and LCV sector contributed Rs 34 billion to national exchequer during 2009-10 out of total FBR collection of Rs 1,390 billion. Some quarters believe the import of used cars is an answer to providing affordably priced cars to local consumers, though nothing can be further from the truth.
There is the perception this will provide an environment of healthy competition and will ensure a steady supply of quality and reasonably priced cars. This too is a misleading notion.
Sources said the import tariffs on used cars in Pakistan are considerably lower when compared to the protection offered to local auto manufacturers in India, Thailand and other countries.
The current policies concerning used cars in Pakistan are still extremely liberal and are often misused by importers under transfer of baggage scheme. Many cars are imported into Pakistan from Dubai under the transfer of residence or gift scheme, which means that the car is supposed to have been registered and used in the UAE for a certain period. This proposal creates a misconception by allowing import of used vehicles, the government will be encouraging a healthy competition in terms of price and quality.
This is nowhere near the truth as the used imported cars being flooded in the local market have extremely high rates compared with their age.
A used imported four-five years old Suzuki Alto with an engine of 650cc and depending on the condition is being sold in the local market at Rs 700,000 to Rs 750,000 where as customer could buy brand new locally made Coure with 800cc engine for Rs 780,000.
Similarly, the five-year old Toyota Vitz a 1000cc engine car, which is one of the most preferred used car by consumers, costs around Rs 950,000 to 1 million. While it’s locally manufactured counterparts Suzuki Cultus is marketed at Rs 890,000. Same is the case with the imported 1300cc Corolla and 1800cc Premio that are available in the market for Rs 1,350,000 and Rs 2,200,000 respectively.
On the other hand the vehicles by the local manufactures in the same category of 1300cc and 1600cc Toyota Corolla price around Rs 1,3940,00 and Corolla Altis is marketed at Rs 1,7190,00. They said after viewing the hiked prices of imported used cars, the government should have assessed its decision to allow their import. Instead, regretfully the government is encouraging corrupt elements to fleece the consumers. Moreover, as the government turns a blind eye, the market continues to be flooded with high priced imported cars and the local auto industry ends up paying the price.
