Government has notified incentives for new entrants in automobile sector under Auto Industry Development Programme (AIDP) to create a competitive environment and availability of vehicles at affordable price.
An amended Statory Regulatory Order (SRO) issued recently by Federal Board of Revenue (FBR) said additional customs-duty leviable under earlier SRO issued in 2006 shall not be charged on sub-components, imported in any kit form by an assembler or manufacturer declared to be a new entrant by the Engineering Development Board (EDB), for a period of three years from the start of assembly or manufacturing of respective vehicles, subject to certain conditions. To safeguard against non-serious players and briefcase assemblers, it has been made imperative for the new entrants that they shall chalk out a plan for progressive manufacturing of the vehicles spreading over a maximum period of three years within which they shall catch up with the localization or indigenization level of respective vehicles, as approved by Auto Industry Development Committee (AIDC) of EDB; and continued non-levy of additional customs duty shall be contingent upon the achievement of progressive annual indigenization as determined by the committee. Automotive industry has been an active and growing field in Pakistan for a long time, however, not as much established to figure, in the prominent list of the top automotive industries. Despite significant production volumes, transfer of technology and localisation of vehicle components, remains low. Most cars in the country have dual fuel options and run on CNG, which is more affordable and cheaper than petrol.
According to ministry of industries, Pakistan produced its first vehicle in 1953, at the National Motors Limited, established in Karachi, to assemble Bedford trucks. Subsequently, buses, light trucks and cars were assembled in the same plant. The industry was highly regulated until the early 1990s. After deregulation, major Japanese manufacturers entered Pakistan’s market thereby, creating some competition in this sector. Assemblers of HINO trucks, Suzuki cars (1984), Mazda trucks, Toyota (1993) and Honda (1994) in particular, entered once deregulation was introduced. Assembly of Daihatsu, Hyundai cars (1999) and various brands of LCVs and range of mini-trucks commenced, recently. The journey of auto industry in Pakistan from 1953 to 2011 has been rough, tough and sometimes very smooth. Car industry saw boom in 2006-2007, when sales touched record peak of 180,834; thanks to rising car financing up to 70-80 per cent by banks due to low interest rates and rising rural buying.
Since then, the industry has been surviving hard to reach the same sales level amid high interest rates and Yen appreciation against Rupee, but high farm income is giving much support to car sales. Good crops this year will keep car sales brisk despite, increase in prices. Car industry has invested over Rs20 billion in the last four to five years, to meet the growing demand. The direct employment in car industry hovers between 5,500-6,000 persons. Auto sector now employs 192,000 people directly and around 1.2 million indirectly; it has Rs98 billion of investments and contributes Rs63 billion as indirect tax in the national exchequer.
