LAHORE – To rein in escalating prices of locally manufactured cars, the government has permitted the import of five-year old passenger cars. Though the decision is made in the name of public interest, opinions on its actual impact vary widely. Industry experts are doubtful of its utility and believe it will adversely impact on the local car manufacturing and auto-vending industry, while car dealers term it a welcome step.
Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) Vice Chairman Syed Nabeel Hashmi was of the opinion that the decision would have a negligible effect on the prices of locally manufactured cars and would not be of benefit to consumers. He believes that automobiles prices are closely tied to the exchange rate, which could only be maintained if the government successfully stabilises the Pakistani rupee against the dollar and yen, the main currency denominations linked to the import of automobile parts.
He pointed out that on average some 50 percent of advanced components required in the manufacturing process are still being imported by local manufacturers. The cost incurred in importing these high-tech parts constitutes 60 percent of the total manufacturing cost. Hashmi dubbed the import decision an anti-industry move. He said the prices of locally manufactured cars could only be stabilised by boosting the indigenous production of the vital parts. He claimed that inconsistent government policies have already throttled the growth of local car manufacturing and auto-vending industry.
He cited a number of automobile industry development schemes and programs which have remained pending for the last five years. He underlined that if domestic production was encouraged in the country, there would be no question of car prices continuing to rise. Citing the example of motorcycle industry, he pointed out that after local production took off; motorcycles prices witnessed a sharp decline. He reasoned that the phenomenon could be replicated in the case of the car manufacturing industry.
Pakistan Automobile Manufacturers Association (PAMA) also believed that the decision is neither serving neither the interests of the country nor the common consumer. PAMA spokesman pointed out that the recent shipload of some 471 vehicles, most were of 1,300CC engine capacity and above and obviously meant to benefit the privileged few. Responding to a query, the spokesman tried to dispel the impression that car manufacturers had artificially jacked up the prices.
He stated that industry representatives have on several occasions pointed out that the prices of important raw materials have continued to rise in recent years. He pointed out that between 2009 and 2010, steel prices witnessed an increase of 26 percent, polypropylene rose by 51 percent, aluminum by 49 percent and that the price of copper shot up by 82 percent. In the same timeframe, the Japanese yen has appreciated by 22 percent and the US dollar by six percent. Despite escalating costs, he asserted that local auto manufacturers had increased car prices by seven percent only.
Car dealers, on the other hand, said that the step taken would prove vital in encouraging more competitive environment in the market, which ultimately compels local manufacturers to reduce prices. Jail Road Traders Association President Muhammad Saleem Butt said that the decision would offer more options to customers and promotes a growth in the overall size of the market.
In response to a query, he stated that in the local market, a huge demand exists for cars with an engine capacity of 1,000cc and below. Initially, dealers will focus on cars ranging from engine capacity of 600cc to 900cc, he added.
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