Import of used cars costs parts makers Rs25-30bn

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KARACHI: Automotive parts and accessories manufacturers have incurred a cumulative loss of Rs25-30 billion during the last one year due to import of used cars in Pakistan, said a former chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM). “The import of used cars has put the survival of automotive parts and accessories manufacturers into question,” said Amir Allahwala, a former chairman of PAAPAM at a press conference on Tuesday.

The conference was held after the government delayed the issuance of SRO pertaining to the reduction in the age limit of used cars imports from five years to three years.

The Economic Coordination Committee (ECC) of the cabinet recently approved the reduction in age limit for import of used cars but the Standing Committee of the National Assembly on Automobiles has reportedly objected to it, arguing that the reduction would impact tax collection.

Allahwala claimed that the import of used cars was a heavy burden on the country’s forex reserves. He said that the reduction on import of used cars would not only lower the burden on reserves but would also help generate more taxes for the national exchequer.


“The import of a used car costs $10,000 on an average against $5,000 for manufacturing a car locally,” said Allahwala. “The automotive car industry paid Rs80 billion in taxes last year against Rs17 billion contributed by the import of used car.”

Chairman PAAPAM Munir K. Bana said that the Federal Board of Revenue has wrongly claimed that reducing the age limit of used cars may cost the government Rs17 billion per annum, based on duties/taxes collected during 2011-12 on approximately 54,800 imported used cars.

“In fact, the revenue generated by the government on a similar quantity of vehicles manufactured by the local industry would have been Rs21.5 billion, exceeding the levy on used cars by Rs4.5 billion per annum (an increase of 26 percent),” said Bana.

Technically speaking, the import of used cars is banned in Pakistan. However, people are importing used cars through misuse of the government’s gift policy, said Allahwala.

“Last year, Pakistan imported some 54,800 used cars at a cost of $272 million from Japan against a few thousand Pakistanis living there in Japan,” he said.

He said that the import of used cars has played havoc with local car assemblers and put their survival into question.

“The three Japanese car assemblers in Pakistan have delayed the launch of five new models after the import of used cars impacted their sales,” he said. “As per a tentative schedule, Toyota will launch two new models in 2013 and 2014. Similarly, Suzuki will launch two models over the next two years while Honda will launch one model.”


An official of Indus Motor Company said that the company had delayed the launch of its Toyota Fortuner SUV by about one-and-half to two years due to an influx of used imported cars in the country and inconsistent import policy of used cars of the government. “However, the company is all set to launch the 2,400cc car in the first quarter of 2013,” he said.

 

Courtesy: The News


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