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Used car imports, local sales on the rise

The overall volume of imported used vehicles grew 65 percent to 76,635 units in 2017 from 46,500 units a year ago, data showed. Imports of used cars and minivans surged to 65,723 units in 2017, rose almost 70 percent from 38,676 units a year ago, latest data released by the auto industry shows. The arrival of sport utility vehicles (SUVs) also increased 59 percent to 7,758 units. Imports of pickups and vans registered a 9 percent rise to 3,154 units.

Low interest rates, increase in auto financing by banks and lifting of vehicles by investors for cab services boosted the imports of used cars as well as sales of locally-assembled vehicles. The government imposed regulatory duties on the purchase of foreign used vehicles in October, which largely failed to dent the overall annual import figures.

Toyota Vitz remained the most popular imported car in 2017. As many as 8,680 units arrived in 2017, up almost 40 percent from a year ago. The volume of Daihatsu Mira swelled 73.1 percent to 6,091 units. Toyota Aqua imports climbed 96 percent to 7,123 units from 3,622 units in 2016. As many as 5,088 units of Suzuki Every were brought into Pakistan in 2017, up 14.6 percent year-on-year. Imports of Daihatsu Hijet rose 34.5 percent to 3,367 units. The arrival of Suzuki Alto doubled to 4,158 units from 2,013 units a year ago. Suzuki WagonR imports surged 115 percent to 3,574 units. Imports of Honda Vezel and Toyota Land Cruiser stood 2,431 units and 3,301 units in 2017, up 57.5 percent and 55.7 percent, respectively, on an annual basis.

Imports of used cars were the biggest impediment to investment by existing assemblers, new entrants and part makers.

The government has allowed importers of used to pay duties in rupees instead of dollars, but only in the case of vehicle deals that were settled by December 31, 2017.

In one-short, the government relaxed the rules it earlier tightened to control the import of used cars and save foreign exchange.

A large number of used cars created congestion at Karachi port, causing a delay in shipments and creating a substantial trouble for authorities. This is the reason the government allowed importers to pay duties in rupees on all car deals that were settled before December 31, 2017.

Over 7,000 imported used cars were lying at the Karachi port waiting to be picked up while an equal number were due to reach the port in a few days. The large number of cars stuck at Karachi Port was a result of government measures taken in October to reduce car imports. The Customs authorities did not have the finalized payment mechanism under which importers could get their cargo cleared.

Importers were willingly not picking up their cargo as they expected the government to retreat from its measures taken in October. Seeing the wide trade deficit, the government imposed regulatory duties on 356 essential and luxury goods. It also changed some rules for used car imports in an effort to reduce the consumption of such goods and reduce pressure on dollar reserves.

Now according to the new rules, the owners or local recipients of all new and used vehicles will pay duties and taxes supported by a bank encashment certificate, showing conversion of foreign remittances into local currency.

Import of used cars only discouraged, not stopped. The importers were of the opinion that the government should have tried some system before enforcing new rules for used car imports.

Car importers wanted the government to delay the implementation of SRO-1067(1) 2017, a circular issued on October 20, until December 2017. The government did not stop the import of used cars and just wanted to discourage unnecessary imports at this time to curtail the growing trade deficit.

For years, car importers have been importing used vehicles through three major schemes namely personal baggage, transfer of residence and gift scheme. The government was of the firm opinion that this will substantially reduce imports of used cars in coming months because it thought that the authentic overseas Pakistanis could bring vehicles into the country.

Pakistan imports over 60,000 used cars a year worth between $300 million to $500 million. According to the local car industry officials, Pakistan is spending close to $750 million a year on used car imports.

A parliamentary committee has taken notice of the government’s policy of importing used cars that created doubt in the market, as thousands of cars are still stuck at the ports awaiting clearance. The government has adopted unclear policy regarding importing used cars, which resulted in increase in prices of local manufactured cars. Moreover, more than 9000 imported cars are being held at different ports.

Businessmen as well as common people are suffering due to the unclear policy regarding importing used cars. The government tried to take a stricter step to prevent the misuse of a scheme that allows nonresident Pakistanis to bring their car back at reduced duty and tax rates when returning to their homeland.

The new rules announced by the commerce ministry to clamp down on this abuse required all duties and taxes on cars imported under the scheme to be paid through a bank account in the name of the person who was returning. The slight modification instantly meant used car importers could no longer take benefit of the scheme to clear the cars they were importing for commercial purposes.

The hue and cry made by the importers was the clearest proof that the government had correctly identified abuse of the scheme. The stranded cars are now set to be cleared, while fresh imports are also ready to begin.

Sales of local cars

Sales of locally produced cars rose 20.4 percent on a year-on-year basis to 103,432 units in July-December 2017. According to the Pakistan Bureau of Statistics, overall imports of cars increased 64 percent to $276 million in July-December last year. Pakistan Association of Automotive Parts and Accessories said the local vending industry lost estimated revenue of Rs23 billion last years. The estimate is based on taking the average local content per vehicle of Rs300,000 on imports of 76,645 units in 2017. This is in contrast to a loss of Rs14 billion in 2016 with imports of 46,500 vehicles.

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