The recent decision of the Finance Ministry of imposing 10 per cent duty on the import of used cars above 1000cc will prove the last nail in coffin of car dealers as they would be unable to compete with local car manufacturers and assemblers, according to dealers of used cars.
The Economic Coordination Committee (ECC) has increased duty on import of used cars by 10 per cent from December 1 which has created panic among the motor car dealers. However, the ministry did not impose any duty on Complete Built Unit (CBU) being imported by the local car manufacturers.
The ministry did not impose any duty on the Hybird cars, which are sold with a price tag of over Rs 3 million in the local market and most of these cars are being imported by local assemblers. Hybrid cars are not manufactured or even assembled in Pakistan. The local car assemblers simply import the cars and sell them to the local customers. And yet, no duty has been imposed on the import of these cars.
“Government should completely ban import of used cars if it doesn’t want to give any benefit to the dealers. Most of the dealers would have to close down their businesses as they cannot compete with the local car manufacturers in this duty structure,” said All Pakistan Motor Dealer Association (APMDA) Chairman H M Shahzad.
He said that the government had already given too much duty incentives to the local car industry but that they were plundering the innocent customers. “These companies take all the money for the car up front, three to four months before the delivery. These companies are doing business with the investment of the local customers,” he said.
Dealers have so far imported 8,000 units in last five months of the current fiscal year, Shahzad said adding that this figure would further come down as the customer would not purchase a used car at the same price as the new car. Dealers imported 24,000 units in 2014-15 down from 65,000 units imported in 2013-14.
According to him, the prices of used imported 1000cc to 1300cc cars would jump up by Rs 96,000 to Rs 136,000; 1800cc-3000cc cars from Rs 400,000 to Rs 500,000 and for above 3000cc cars the price would go up by Rs 800,000. He said the prices of all the used cars would be higher than the locally manufactured/CBU cars.
The new auto policy was to be announced by the trade minister, but it seems the government decided to pass on all the benefit to the local auto assemblers as the decision of imposing 10 per cent duty only on the used cars would directly hit the used car dealers.
“Because of this decision of the government, auto sales will increase from December by 30 to 40 per cent. Profit of the local car manufacturers will also increase,” said an analyst of Topline securities.
The demand of the used imported cars was on the rise in Pakistan because of their air bags and other safety features. These safety features were not available in the locally manufactured cars in Pakistan.
The on-money on the purchase of new Toyota car is around Rs 150,000 to Rs 300,000 depending on the car’s features. On-money on Suzuki is around Rs 50,000 to 100,000 on Mehran and its other brands and its delivery period is three-months. Local car dealers are earning thousands of rupees on a car without even having to made all the investment, even as their customers have to wait three-four months for their cars.