PAMA hails ban on used cars import – Proposed ‘new entrant policy’ to hurt the existing OEMs

KARACHI – Pakistan Automotive Manufacturers Association (PAMA) has threatened the government that if the proposed new entrant policy for new auto manufacturers was approved, the business and development of local auto parts venders would be severely affected.
Talking about the proposed new entrants policy, director general PAMA Abdul Waheed Khan, , said that under the proposed policy, the new entrants are allowed to import at 32.5 percent duty without using local components for a three year period. The new entrants would benefit at the cost of existing Original Equipment Manufacturers (OEMs). He was talking to media persons here at a local hotel on Friday.
The policy has further relaxed the custom levies for new entrants to import CKD at five percent in the first year, 10 percent in the second year, which would deny a level paying field to the existing OEMs besides pushing the auto venders out of business. While appreciating the government’s move to ban the import of used vehicles, the representatives of OEMs and PAMA said if the import of used vehicles were necessary to meet the local demand than the government should allow the same business on a commercial basis.
As the import of used vehicles, which earlier was going on under the umbrella of gift scheme specially made for the overseas Pakistanis, was not only causing huge losses to the OEMs but also creating the issue of transfer of technology, they added. They also questioned that whether the overseas Pakistanis were coming back to the country at the same rate the vehicles were coming into the country.
Almost 4,800 used vehicles were imported last year while 600 were ready to enter the country causing immense damage to the local industry. They further said this would also result in layoffs on a massive scale, not only for the in-house work force at the automotive plants, but also for the large number of vendors, to whom certain automotive parts are outsourced for manufacturing.
Raza Ansari, director marketing division of Indus Motor Company(IMC), said on the occasion that the existing OEMs would welcome the new companies in Pakistan but with the existing policy. The government could also offer some concessions to the new entries but not on the ground of tariffs, he said.
In reply to a query, he said that the OEMs were working on Auto Industry Development Program (AIDP) to bridge the supply and demand gap at the local level which currently has been reduced to zero and locally produced cars of IMC were available on the floors at its dealer network.
Talking about the price of IMC’s vehicles, Raza said that although during the last two years important input materials such as steel have increased by 26 percent, Japanese Yen appreciated by 22 percent and the US dollar by 6 percent, the price at IMC was only increased by seven percent.
Many IMC variants produced in the country, he claimed, were still cheaper than India and Thailand. Moreover, the company has reduced prices of branded vehicles to pass on the benefits of localisation to the customers. He further said that the three significant OEMs, Pak Suzuki, Honda and Toyota alone have invested over Rs 20 billion during last four years while increasing their total capacity by 100 percent during the last 15 years. The industry was utilizing only half of the capacity as the demand has substantially decreased.