Used cars import lowers country’s local production

LAHORE - The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has said that the local production of cars has registered a massive reduction of 22,000-25,000 units owing to import of 50,000 used cars, besides hurting the domestic auto parts vending industry. “The domestic auto parts manufacturers are feeling the brunt of the government’s inconsistent policies as the demand for locally produced vehicles has slowed down. This is evident by the fact that the size of the local market has shrunk to currently 30 percent from its peak level of the year 2007 when some 200,000 vehicles were produced, observed Business Forum of Punjab and PAAPAM Chairman Syed Nabeel Hashmi while addressing the meeting of managing committee of the association here on Monday. He said that with double digit interest rates, unprecedented depreciation in exchange rate and unavailability of gas and electricity, the government must intervene to ensure that local engineering units do not shut down and continue to provide jobs to the skilled and semi skilled labour force.The BFP chairman observed that precious foreign exchange is being ‘wasted’ on import of spare parts for these used vehicles, which will also cause a loss to the exchequer to the tune of $50 million only in one year.  He said that the FBR has not revised the duty structure on import of used cars for the last six years, as the taxes paid at import stage are fixed in US dollar which were determined in 2006. The yen and US dollar parity has since changed from 114 yen to a dollar to 79 yen. He said that the foreign exchange consumed in import of used cars is twice that needed for CKD operation due to considerable localisation. The influx of used cars in the country has been taking a heavy toll on local auto assemblers who purchase 60 percent of the auto parts from domestic manufacturers, he added. The BFP and PAAPAM chairman maintained that the domestic industry has tremendously developed during last few years mainly by investing huge capital but also with the help of agreements of transfer of technology with world renowned equipment makers. This includes hundreds of components such as bumpers, radiators, mufflers, batteries, tyres, wheels, air conditioners, wiring harnesses, instrument panels, steering wheels, sun-visors, seats, carpets, interior panels, sheet metal and plastic parts. All of this is being locally produced by more than 400 vending companies. Almost 2,200,000 skilled workers are directly and indirectly associated with these local vending companies. PAAPAM vice chairman Munir Bana said that the traders in violation of the rules are importing more than five years’ old cars and getting them cleared through foul means. It has also been noted that spare parts are also smuggled in many imported cars.  The penalty imposed by Ministry of Commerce, for importing cars which are over 5 years old, will not hurt these unscrupulous traders as they will under invoice the vehicles and will continue to thrive. He said that during the last 12 months almost 50,000 used vehicles have been imported, amounting to 30 percent of the total market demand for automobiles in the country, causing a loss of over Rs14 billion revenue to the government in terms of relaxations allowed pertaining to depreciation allowance. He said that it is strange that most of the imported cars of 1000cc (or higher) such as Vitz, Corolla, Belta, Premio, Axio, Mira, Probox, Land Cruiser and Pajero are being sold in the price range of Rs 1.1m to Rs 3.5m. One can guess now that these vehicles, mostly purchased by elites, are being imported at the cost of the local automobile industry’s growth.The scrupulous dealers purchase copies of passports and other relevant documents from so called overseas Pakistanis to flourish their businesses of used cars. And the government has joined them in fulfilling their agenda to turn the country into a junkyard.

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