KARACHI: To support the struggling local sector, the Pakistan Automotive Manufacturers Association (PAMA) has proposed charging a 15% regulatory levy on old import automobiles that fall within the 1300 CC category. Experts and consumers have pushed Original Equipment Manufacturers (OEMs) and regional manufacturers-cum-assemblers to build affordable, high-quality cars in order to deter used car imports and encourage as much localization of the sector as possible.
“In order to sustain the growth of the local industry, achieve the targets under Auto Policy 2012-2026, and save the industry from unfair competition from the import of used vehicles (specifically in the below 1300 CC category),” wrote PAMA Secretary General Abdul Waheed Khan in a letter to the prime minister and other federal ministers and policymakers.
In addition to keeping the existing rate of 15% regulatory tax on vehicles over the 1300 CC category, we propose to apply a 15% regulatory charge on the import of used cars below that category. Since the SRO 577 (I) 2005 was last revised in 2015, it is no longer in effect, and taxes are now imposed on the taxable values that were in place at the time, which has resulted in a significant loss to the exchequer. This SRO needs to be updated to reflect current costs.
Khan pointed out that local vehicle production and sales have reached all-time lows, while the import of secondhand cars has increased by 600% in recent years compared to the years before. He expressed optimism that the federal budget for 2024–2025 would include robust measures to stop this illicit activity, which thrives unfairly by utilizing import policy privileges that are only granted to Pakistanis living abroad.
With effect from July 1, the Finance Act placed a 15% regulatory duty on the import of old cars; however, this duty was only applied to the category of vehicles above 1300 CC, and the engine capacity sector below 1300 CC was left out. According to customs import data for the period of January to May 2024, the below 1300 CC category accounts for almost 62% of all used automobile imports.
The auto business should be as locally localized as possible, according to auto sector analysts and consumers, who have also pushed for reasonably priced, high-quality cars to be sold locally in order to deter the import of used cars. When the industry was expanding, local car dealers in Pakistan used an illicit selling technique known as “own-money” a black-market premium to con and take advantage of gullible consumers. Rather than helping consumers, the automotive industry which includes OEMs and manufacturers-cum-assemblers then increased car costs while monitoring this pattern.
Customers continue to complain about own-money on select variants in the market, with dealers taking advantage of them under the guise of car shortages, despite spiking inflation, rupee depreciation, and runaway interest rates breaking the back of consumers and resulting in dismal sales for over two years. Exorbitant pricing prevent middle-class buyers from owning autos.
Prominent automotive expert Muhammad Sabir Hussain questioned, “Why is the business putting so much strain on the nation under the guise of growing the local industry? Why is the local auto sector concerned if the government provided some aid to Pakistanis living abroad about the import of secondhand cars? What better and higher-quality vehicles is the local industry offering?
We will make a strong request to the government to support the local auto sector if it is successful in selling better and more affordable cars. The auto business is tricking the government into putting tariffs on used car imports under the guise of the industry, rather than manufacturing better and more affordable vehicles.
