There is a demand to lift the ban on the import of used cars

Oct 06 - 12, 2003

Repeated requests and warnings by the government, including the ones issued by the erstwhile Federal Minister for Industries and Production Liaquat Jatoi a few months ago and by Prime Minister Zafarullah Jamali recently, have failed to move the local car assemblers to cut the prices.

Not only the local car producers have failed to produce affordable cars, the one of the primary pre-requisite to justify protection against imports vide highly discouraging duty on imports, but the long waiting period for the delivery of cars and their black marketing have also made the lives miserable for thousands of bookers.

The situation has forced the minister to constitute a high-level task force which among other things would also review the cost of production of locally produced cars, to make proposals how the prices could be reduced, the reasons for long waiting for the delivery of booked cars, the pattern of demand and supply and comparison of the prices of locally produced cars in other countries. The task force has been asked to submit its report by the 30th of this month so that the auto policy can be reviewed.

The Pakistani car manufacturers have been accorded the protection unavailable to any other industry in Pakistan effectively discouraging imports through high duties to make prospects of imports of new and used vehicles almost impossible. This has resulted in creating a fearsome monopoly on the part of the local industry to sell the cars at prices which are deemed high not only by local standards but also when compared to the prices in the neighbouring countries and in cases also in the countries of the principals.

Just how effectively the imports of cars into the country is evident from the fact that even after the reduction in 2002-2003 Budget, the duty on the import of upto 1000 cc car was 75 per cent, 1001-1500 cc car 100 per cent, 1501-1800cc car 125 per cent and 1801 cc and above car was 200 per cent of the landed value. In Budget 2003-04 this June, the government reduced the duty on the import of 1801 cc and above cars by 50 per cent to 200 per cent but left the import duty on small car intact thereby providing no relief to the buyers in a market where there is immense demand for small cars.

The cheapest car in the country, is priced at Rs 299,000 while the most expensive, is retailing in at Rs 1.245 million. All the major companies have bookings enough to keep them busy for over 9 months while those ready to buy a car on cash can drive away with it if they are ready to buy the 'premium' which runs anywhere from Rs 42,000 in case of Mehran and as much as Rs 125,000 in case of more expensive Honda or Toyota car.

There are also reports that the government has warned the car producers that failure to reduce prices, despite a substantial shedding of value of dollar against the rupee in last years the local producers have conveniently failed to pass off any benefit to the buyers, can result in opening of car imports on reduced duty.

The ultimate cost of the rampant black marketing practises is paid by thousands of bookers of all brands of locally produced cars who have to wait for period way beyond the promised delivery date. What makes the situation even more serious is that the manufacturers have find it fit to book the cars on 100 per cent despite directive of the government. They have found ways to circumvent the order. For instance, a local manufacturer announced to book its high priced cars at Rs 100,000 only and vide a series of advertisements which appeared in the print media. However, sources informed PAGE that the change is only cosmetic and the bookers are asked to pay the full price of the booked vehicle once their name got selected in the draw held by the company. The practise of booking a vehicle at full price in price months in advance of the usually belated delivery thus continues unabated.

While the local auto industry has failed to fulfilled one of its primary pre-requisite promise of producing affordable cars it is costing the national economy heavily in many other ways. For instance, cost of importing 45,000-50,000 Completely Knock-Down (CKD) units alone are costing the country around $ 225 million, or Rs 13 billion at current exchange rates, a year and will go up as manufacturers gear up to increase the production capacity.

For the first time ever the chambers of commerce and industry in the various cities of the country are demanding the government to lift up the 'ban' on the import used cars into the country which was banned by the then government nine years ago. The demand was first made by the Karachi Chamber of Commerce and Industry a few months ago expressing concerns about the high prices of locally produced cars and the rampant black marketing practices. The formation of the task force to reveiew various aspects of the car manufacture including the manufacturers claims of high production costs and taxes to justify high prices would now be closely scrutinised the validity of these claims. We have to wait to see whether it would result in price reduction for the benefit of the people.