KARACHI: As the 2016-21 auto policy comes to an end on June 30, 2021, consumers have not witnessed any deployment of small cars of 800cc or less by international new entrants who have instead moved towards l introduction of sport utility vehicles (SUVs) and high engine power. models under tariff concessions.
There is also no sign that international automakers will start a new project to manufacture vehicles of 800cc or less that the masses need.
Pakistan has attracted more than $ 1 billion in investment from new entrants – mainly Korea and China – under the 2016-2021 auto policy.
The main objective of the 2016-21 automotive policy was to create competition that would result in lower car prices, especially in the entry-level segment so that the country’s middle-class population could buy smaller cars.
No global brand is deploying a car up to 800cc or less as part of the 2016-21 automotive policy
Unfortunately, after almost five years, although the auto market has been inundated with SUVs and premium passenger cars, there isn’t a single entry-level car below 800cc by a renowned international brand. .
Under policy 2016-21, new entrants are allowed to import parts at a concessional tariff of only 10 percent, while old manufacturers import those parts at a tariff of 30 percent.
Pakistan Auto Parts and Accessories Manufacturers Association (Paapam) President Abdul Rehman Aizaz said SUV assembly is an easy option for newcomers. “They were allowed to import most of its parts at a preferential duty rate due to a slim ‘A max parts list’ of this segment, assemble the vehicle and easily sell them in the market that is already booming due to low interest rates and high consumer demand, ”explained the president of Paapam.
“In fact, the 2016-21 auto policy resulted in a price advantage for high-end SUV and passenger car consumers,” he added. The concessions on import duties provided for in the 2016-21 policy would continue until June 2026. These concessions resulted in import subsidies, loss of revenue for the government, job creation in a country foreigner instead of Pakistan, a loss of GDP for the country, etc. , he complained.
Without a doubt, the 2016-21 policy, especially in the case of new assemblers, has resulted in a slowdown in localization and loss of business for auto parts manufacturers who are key players in the automotive value chain and where most of the employment is generated, he added.
In the new automotive policy 2021-2026, there are indications that duties on completely built (CBU) and completely dismantled (CKD) vehicles will be reduced in all passenger car and SUV segments. The reduction of CBUs and CKDs would once again result in a subsidy on imports and this also especially in the luxury car and SUV segment. The Paapam chief was of the opinion that in order to reduce the prices of entry-level cars, dealerships should only target this segment. Instead of reducing CKD and CBU duties, consideration should be given to concessions in mark-up rates for financing smaller cars, the removal of federal excise duties and additional tariffs on raw materials and parts, reduction in sales tax rates, etc.
“Before finalization, it is necessary that all proposals are considered in detail with sufficient time and opportunity to discuss the pros and cons and come up with a policy that will support the Prime Minister’s vision in Pakistan,” Mr. Aizaz at the top.
Shankar Talreja of Topline Securities said there has been a global shift towards SUVs and the trend with the 2016-21 auto policy has become more affordable for consumers as well.
In Pakistan, the SUV market has remained untapped and barely one to two models have been offered to consumers and that too at higher price ranges of over Rs 7 million.
Mr Talreja said that with a new auto policy, assemblers have targeted buyers of prime sedans and provided them with more luxury at a similar price range.
He said more powerful motor vehicles have become more profitable while smaller cars will face direct competition with the Suzuki Alto 660cc.
Meanwhile, a Korean car and SUV assembler said very few companies have models below 1,000cc.
Posted in Dawn on May 4, 2021