Ministry of Industries and Production oppose import of used cars, rejects import/re-export policy proposal

KARACHI: Under influence of the cartel of local auto assemblers, the Ministry of Industries and Production has opposed import of used cars and recommended to reject the proposal to devise import and re-export of used vehicle policy 2019-20.

Japanese car assemblers led cartel of auto assemblers influenced the ministry and the Engineering Development Board (EDB), as the imported cars, being cheaper and better, challenge their monopoly.[the_ad id=”31605″]It may be mentioned here that local assemblers such as Pak Suzuki, Indus Motor Company (Toyota) and Honda Cars are producing very low quality vehicles without safety features and selling these products at much higher rates than the imported cars, which are way better in quality and meet international safety parameters.

Local assemblers have long been protected despite they didn’t meet the targets of indigenization, as they are only assembling the imported kits, while the profit they earned is repatriated abroad.

A meeting was held at Engineering Development Board (EDB) with the representatives of the Car Dealer Federation the other day to analyze the proposal regarding formulation of a ten year policy to enable and regulate commercial import/re=export of old and used cars.

The meeting unanimously observed that the dealers were interested in commercial import of used/old cars. EDB opined the proposed plan will negatively affect existing original equipment manufacturers (OEMs), new entrants and auto part manufacturers.

It is important to consider that Auto Development Policy (ADP) 2016-21 has attracted investment of more than $ 1.3 billion so far from foreign investors who are at various stages of setting up their projects Under ADP 2016-21.

As many as fifteen new investors have been granted Greenfield status and under Brownfield category two closed down units have been revived, the existing OEMs are enhancing their capacities, three new entrants have started production and other new entrants are expected to start their production/complete their manufacturing facilities shortly. As per business plans, few new entrants have plans to export as well.

The ministry observed that in the given scenario, allowing commercial import for domestic market would be against the spirit of Automotive Development Policy 2016-21 which was prepared in consultation with Board of Investment, Federal Board of Revenue (FBR) and Ministry of Commerce etc. and approved by ECC of the cabinet.

The import of used and second hand cars has declined to almost none after the government imposed the condition that payment of duties and taxes for all car imports be made in foreign exchange to be directly remitted from abroad by the person importing the vehicle.

Most used cars are imported in Pakistan under baggage rules or gift scheme, which is designed for personal purposes only, but are then sold off in the market. Car assemblers and their vendors are relaxed on the move, but traders of used cars anticipate drastic fall in import.

On the other Customs Agents Association opposed the condition saying the restrictions had reduced the legal imports of vehicles, but the vehicles were still coming through illegal channels depriving the government of revenue. It may be mentioned here that a large chunk of Customs revenue came from imported cars.

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