Local car manufacturers opposing import of used cars
The Federal Board of Revenue (FBR) had proposed that import of up to five-year-old used cars should be allowed compared to the current three-year ceiling. It also called for opening imports for commercial purposes. In 2005-2006 import of used vehicles was allowed after a long period of 12 years. This was eventually limited to import of 3-year-old used vehicles only in several schemes, as a consequent of which local assemblers have acquired a hold on prices and supply, and the freedom of choice of consumers is harshly confined.
In 2011-12, the import of used cars reached an all time high of 57,000 cars due to relaxation in age limit from three to five years. In the subsequent year, however, the age limit was reduced to three years and the imports dropped to 45,000 cars in 2012-13 and 29,000 in 2013-14.
The import of used cars is allowed under three schemes — as personal baggage (once in two years), bringing the vehicle into the country on transfer of residence from another country, and sending a vehicle as a gift to a family member residing in Pakistan (once in two years).
The current fiscal year has witnessed a record high in the import of cars so far with a significant surge of 35 percent worth over $218 million compared to the same period in the previous year.
Over the past few years, satisfactory economic conditions of Pakistan have had a positive impact on the growth of automotive industry. Higher per capita income and reduced interest rates have generated in a boom in auto sales. Lower fuel prices also have a good impact on auto prices.
Imported luxury cars have also gained unique popularity recently. There is also seen a large increase in the year 2014-2015 for luxury hybrid vehicles. Competition is developing for local manufacturers as more imported vehicles come into the market.
Suzuki is already in the process of ceasing production of some of its older models. According to market news the increasing competition will have a satisfactory impact regarding quality as well as the cost of domestically produced vehicles.
Liberalization in used vehicles’ import will result in total closure of local auto makers with a job loss of more than 2 million workers in auto and allied engineering industry.
Allowing import of five year old cars is already causing humiliation to the government which allowed the same to make cheaper cars available to consumers but most of them are priced at the rates of new locally made cars.
The tax evading influential have mustered the courage to further this humiliation by demanding relaxation on commercial import of used cars up to 10 years old which is damaging for already an unstable economy.
The trader strong group has not only asked the Federal Minister of Commerce to further relax the age limit of used imported cars from five years to 10 years but also to allow the commercial imports of the same. This will destroy the local industry and would make Pakistan a disposal area.
Dealers hoodwinked the government into believing that the domestic car industry was producing expensive cars and resultantly government relaxed the import of used cars up to five years.
At present, the local market is crowded with used imported cars but their rates are extremely high compared to their age. A used imported four-five year old Suzuki Alto with an engine of 650cc and depending on condition is being sold in the local market at Rs700,000 to Rs750,000 where as customer could buy brand new locally made alto with 1000cc engine for this much money.
A large number of luxury cars are being imported, which is denying the government of precious foreign exchange. The government certainly has all the accurate information in this regard and should have admonished the dealers that assured that the rates of used cars would be much lower to benefit the consumers.
Now the influential importers have come up with the idea of bringing in 10-year-old used cars that are considered scrapped the world over.
These cars would over burden the consumers in the long run due to non-availability of spare parts and local capacity for after sales service.
Allowing import of used vehicles commercially will not only be an injustice to the poor consumers but a great loss to the local industry which has invested billions of rupees over past many years and provided jobs to millions of people.
The government has realized and is considering an enormous increase in fixed duties on used imported cars in the federal budget 2016-17 aimed at protecting the local industry.
All Pakistan Motor Dealers Association (APMDA) has submitted for budget 2016-2017 to allow commercial imports of used vehicles of up to 5 years of age. Allowing commercial imports, in addition to existing schemes for the import of used vehicles like Transfer of Residence Scheme, Gift Scheme and Baggage Scheme, would be in line with the government’s policy of the documentation of the economy and 100 per cent increase in revenue.
Local automobile parts suppliers have launched a fresh drive against used car imports saying that their influx is negatively affecting the livelihood of workers and appealed for imposition of a ban as the demand for locally manufactured cars declined in recent weeks.
It would also bring the import of used vehicles business into the tax net and will help the government expand its tax base. Only certified members of All Pakistan Motor Dealers Association (APMDA) should be allowed to import the used vehicles on a commercial basis for the sake of transparency of the trade.
The Association has recommended that the government should impose a fixed rate of duty on the import of used vehicles of engine capacity of above 1800CC as is the policy for used vehicles up to 1800CC, which were already subjected to a fixed rate of import duty.
It would help the government check the revenue loss suffered due to arbitrary fixing of import duty and will help to eliminate the variation of taxes in all the ports of country.
APDMA has proposed the government to withdraw advance tax for the registration and transfer of vehicles with immediate effect. This tax is being charged in Punjab and Sindh only. The people are not going for registration and transfer of vehicles and driving on open letter.