Duty on cars up to 1,800cc reduced by 10 percent

by Israr Khan

ISLAMABAD: The new Automotive Development Policy (ADP) 2016-21 was announced on Monday under which duty on cars up to 1,800cc has been reduced by 10 percent and a waiver in taxes will be given on installing new automotive plants.

Announcing the new policy, Minister for Defence Khawaja Asif pointed out that three car assemblers, who currently share Pakistan’s 0.15 million car market, are enjoying monopoly in their respective areas with one focusing on production of small cars and two others on large cars.

“For the last three to four decades, three manufacturers had the monopoly on the market while having established dealerships that always discouraged new entrants. The new policy aims at consumers’ protection and then enabling them (consumers) to dictate the producers,” he said.

The minister was accompanied by Board of Investment (BOI) Chairman Miftah Ismail, Secretary Industries Arif Azeem and Chief Executive Officer (CEO) Engineering Development Board (EDB) Tariq Ijaz Chaudhry.

Asif said that he was made the convener of a committee around two years back to work on the auto policy offering incentives to new entrants to safeguard the interests of consumers by creating a competitive environment. He said the Economic Coordination Committee (ECC) had taken up the issue of consumers’ exploitation by the existing car assemblers two years back and formed a committee to formulate a new auto policy to attract new entrants. He said the motorcycle industry had grabbed the market potential but lamented that the local car assemblers had failed to grab the market potential despite enjoying several incentives like duties exemption. He said that local car assemblers had not even turned into manufacturers due to the failure in completing the deletion programme.

The minister said that the Pakistani rupee appreciated against the Japanese Yen and steel prices reduced sizeably but the car assemblers did not pass on its benefits to consumers, so once some new players entered the market, a healthy competition would emerge that would benefit the consumers in terms of prices and quality. 

Although, Asif appreciated the contribution of these manufacturers in the country’s Large Scale Manufacturing (LSM) yet said he that we cannot leave the consumers at the mercy of them (manufacturers). He lamented the fact that one could not term these car assemblers as manufacturers as they had to indigenise the production some 10 to 15 years ago but were still importing automotive parts.

“The car assemblers have not yet introduced international quality technology, including air bags, environmental friendly engines and ABS brakes,” he said.Khawaja Asif also underlined the fact that in other countries Euro-VI cars are being used while the car assemblers are selling Euro-II cars in Pakistan.

“The car assemblers have not produced quality products in line with the expectations of the government so these have failed in achieving a breakthrough in the export market.” The minister said the cars being sold in Pakistan consume more fuel than the limit set at the international level, adding, “The new policy is valid up to 2021; however, an improvement can be brought in it with the passage of time.”

Miftah Ismail said that after the implementation of the policy, new entrants would enter the market. “Under this policy, we have targeted to increase cars’ production from the existing 150,000 to 350,000 by the end of this policy in 2021.”

He said the government had been holding talks with various manufacturers and if they entered the market, the deletion programme would almost be completed and then car manufacturing would become indigenous. Under the complete built unit (CBU) or finished product import, 10 percent duty cut has been proposed. The import of used cars having age limit of three years and buses, vans, trucks, pickups, SUVs including 4X4 vehicles will continue in Pakistan.

From July 2016, the duty on import of spare parts of cars has been reduced. The importers can import those spare parts that are not locally produced on duty up to 30 percent against the existing 32.5 percent while the duty on parts that are produced in the country has been reduced to 45 percent from 50 percent.

When asked by The News after the news conference whether any internationally recognised car manufacturing company showed any kind of negative response over the policy, Miftah Ismail and Secretary Ministry of Industries and Production Arif Azeem maintained that no such thing had happened.

Tariq Ejaz Chaudhry said the government had also taken into account welfare of consumers. He said Pakistan was an observer of WP 29 and would become its member next year to pursue actions aimed at development of regulations based on the United Nations Regulations (UNRs). He said the government would ensure the use of Euro-IV into new cars against Euro-II and an automobile institute would also be set up for training purposes.

-- Originally published in The News