Bike exports surge to 10,500 during April to July 2011
Value of Chinese bike parts fixed at higher side, Tractor, heavy vehicles parts get benefits
Every big organization always tries to corner or eat up their market rivals in order to maintain their monopoly and market share.
A leading Japanese bike maker with the help of manufacturers’ association have been using all sort of market tactics to sideline the low cost Japanese bike markers so that it could regain its lost market share in the urban areas especially in Karachi.
Hurdles are being created at both federal and provincial level and even at the ministries’ level but the Chinese bike makers, on the back of stable urban demand, have been running over the hurdles. However, for the few months, the Chinese bike makers seem to have become tired in making efforts to clarify their point of view before Member Customs FBR and Director General Customs Valuation Customs House seeking lower values for bike parts of Chinese origin.
Officials of the Association of Pakistan Motorcycle Assemblers (APMA) again recently met the top official of FBR and Customs Valuation Department but so far the problem still exists.
APMA drew the attention towards problems being faced by the importer-***-assembler of motorcycle and importers of motorcycle parts for commercial purpose at Customs Valuation Department and difficulties in clearance of parts through PRAL and through PACCs.
APMA has put the responsibility on one big bike assembler so that the big company could maintain its dominating position in the market. The APMA also blamed PAMA for taking the side of the Japanese bike maker who does not like to see the prosperity of small and medium sized bike makers who are selling motorcycle at 40 per cent lesser than the price of a leading Japanese bike maker. The retail price of Honda CD-70 is Rs 66,500 and the price of Chinese bike hovers between Rs 40,000-42,000.
The Association said that the maker of Honda also wants to discontinue the export of bike by Chinese bike makers at a price ranging between $360-400 per unit which is earning precious foreign exchange for the country.
Due to rising cost of production on account of higher valuation of parts and accessories the Chinese bike makers are unable to lower the prices and instead the assemblers are bound to pass on the impact of higher valuation to the end users. Some assemblers are trying to take the hit on themselves by not raising the prices after fixation of higher valuation of parts especially because of stiff competition in urban market especially Karachi.
The Association said that the Customs department is issuing the valuation advice without consulting the stakeholders, market survey and without the origin items and without obtaining quotation from international markets in violation of Section 25 of the Customs Act. They are entertaining the monopolies of some leading bike makers.
APMA seeks cancellation of Valuation Advice/Ruling under section 25-A No.333 dated 07-06.2011 of motorcycle parts, components (China) and assessment to be done on the basis of international market by origin of imported goods or accept importers declared values or may recover custom duties from the importers of motorcycle parts China origin at $1.2 per kg on all parts up to refixation of values of motorcycle parts by the Valuation Department.
The Association said “all the China origin auto sector parts for cars, tractors, aluminum alloy wheels, high tensile screws and bolts and motorcycles are based on same technology and materials but the Director General of Customs Valuation has issued different valuation advises/rulings for auto parts.”
The Valuation Department issued customs value (C&F) values for aluminum alloy wheels and wheel rims of all vehicles at $3.38 for China origin and $4.0 per kg for all other origins. The value for wheel rim (other than alloy) of all vehicles imported from China was fixed at $0.43 per kg or less than half dollar per kg for all other origin too. In March this year, the value of high tensile screws and bolts imported from China was fixed at $1.1 per kg.
On June 23 this year, the value for about 17 different tractor parts and components of Chinese origin was determined at $1.5 to $3.00 per kg. In June this year, the value of bike parts for example aluminum crank case was fixed at $5.45 per kg and crank case at $5.87 per kg, carburetor at $13.54 per kg etc.
The value for crank case cover for left and right were fixed at $5.4 and $5.15 per kg respectively. Rectified regulator was valued at $10.20 per kg followed by insulator carburetor at $13.60, spark plug at $6.61, ring piston top $10 per kg, spring clutch level $11 per kg, valve inlet $16.42 per kg, oil through $25 per kg, cover cylinder head $29.74 per kg and cover cylinder head top $33.66 per kg.
APMA said that due to increase in valuation rates, the association members could not reduce the price after government’s decision of abolishing 2.5 per cent special excise duty and one per cent cut in general sales tax.
APMA chairman Mohammad Sabir Shaikh expressed surprise over the thinking of the bureaucracy which seems influenced by the PAMA and one of its leading members for fixing higher value of bikes on which sizable number of population moves on.
He said that the government is giving preference to the tractor and heavy vehicle parts for fixing their value at lower side despite knowing that their prices run into million of rupees instead of giving benefits to the low cost bikes which are available in few thousand of rupees.
Irrespective of negative business environment, Pakistani bike makers are also making their presence in world markets felt through exports despite not getting the facility of $50 per bike.
A bike maker said that most of the Pakistani made bike find their way into Afghanistan from April to October season and after snowfall from November to March the exports usually remain suspended to the neighboring country. He claimed that Chinese bike makers hold major share in exports of bikes.
According to PAMA and some Chinese bike makers, the domestic bike industry has exported 10,500 units from April to July 2011 to different countries. After a steep drop in exports of around 135 percent from a peak of US $3.5 million in 2009-10, the high-quality and low-priced locally produced bikes have effectively checked imports.
The industry exported in excess of 2,500 units per month which is against an average export of around 1,200 units per month last year. If the trend continues, Pakistan will easily be able to double its motorcycle exports this year.
Motorcycle exports stood at $786,310 in the year 2009-10 and surged to $3.5 million in the next year on the strength of $50 per unit Research and Development facility provided by the Government. The facility was withdrawn in 2010-11 after which the exports nosedived by 135 percent to $1.34 million.
“The decline in exports would have been much higher but the prudent marketing strategy adopted by large motorcycle players controlled it”, said Mr. Fahad Iqbal CEO, HKF Engineering, makers of Ravi motorcycles. He said that the exports of motorcycles averaged over 2,500 units during the last four months which is a good sign for the industry. This, he added, is double the monthly export of 1,200 units in 2009-10 when record exports were witnessed. He said that the trend is expected to continue and Pakistan will easily be able to double its motorcycle exports this year.
Exports from Pakistan are textile dependent for the most part. Motorcycle industry provides a viable option as the next emerging export from Pakistan. “The industry is aiming to export half a million units annually by the year 2016” a bike maker said.
Experts pleaded that the current policy regarding motorcycles should not be disturbed as with its huge forward and backward linkages, the motorcycle industry moves the wheel of the economy.
“Most serious threat to this industry is a sudden policy shift, and threats for that are abundant now a day”, a bike maker said. “Talks of commercial imports of motorcycles and change in tariff to suit a certain entity will wreck havoc on this industry,” he added while demanding the government not to disturb the growth momentum of most localized engineering industry in Pakistan.
The on going floods and heavy rains in Sindh is likely to adversely affect the sales of leading bike makers who enjoy over 50 per cent share of their total sale in rural areas. A lot depends on farmers and growers farm income from various crops in other provinces of Pakistan this year which will definitely nullify the bad sales prospects in Sindh.
The maker of Honda bikes has already seen sharp jump in sales during July-August 2011 to 102,196 units from 85,176 units in the same period of last year. Suzuki bike sales reached to 3,722 units from 2,955 units. However, sale of Yamaha bike fell to 16,585 units from 20,247 units in July-August 2010.