September 15, 2003	Monday	Rajab 17, 1424

Is the government really serious in giving a jerk to the local automobile assemblers by opening the import of used cars, in case they fail to bring down prices,check profiteering and ensure timely delivery to the consumers?

Or is it the stance adopted by the government is a routine exercise undertaken in response to the complaints made by various sections of the trade.

The government’s warning has caused a stir in the market as some analysts say that the setting up of a task force by the ministry of industries and production to look into the above mentioned affairs of the auto industry and to present the report by September 30 seems like a final warning to the assemblers to resolve issues on permanent basis. They say that this time the government has decided to deal with the assemblers strictly if they default in complying with the government criteria.

However, many auto analysts believe that it would be a very hard decision for the government to fully liberalize the import of used cars when the local assemblers and their vendors are enjoying honeymoon period after a gap of two years and have come out of the red.

Car industry analysts say that the import of used cars will result in sheer collapse of the industry which has invested billions of rupees, besides providing jobs to thousands. The closure of local car industry will have a devastating impact on the vending industry.

Many analysts say that the stiff note of caution by the government carries some weight as the competition is stiffening and the market is now heading for open competition after 15 months when the WTO rules and regulations come into force from January 2005. They think that there is a possibility that the government may curtail the import duties in the 2003-2004 budget under the WTO obligations.

Some analysts say that in case the assemblers were unable to resolve the issues of price cut and premiums, the government may cut the import duties on used cars after the September 30 warning in order to punish the auto assemblers instead of fully allowing the import of cars.

The market now is buzzing with the news that the government is under tremendous pressure from various quarters to open the used car import. However, market sources say that the government, as in the past, will definitely not succumb to the pressure of the used car dealers lobby and other trade bodies to liberalize import of used cars.

In view of the past experience, the warnings given by the industries minister to cut the prices and check the premiums on new cars had virtually failed to produce any desired results. Jatoi took four months to pressurize the assemblers in slashing the prices. The assemblers, as a gesture of goodwill to show how much they care for their consumers, slashed the prices by Rs2,000-3,000 (Pak Suzuki) and Rs12,000-17,000 (Honda), while Toyota rejected the price cut.

In the meantime, Liaquat Jatoi, in a meeting, with businessmen at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), ahead of the price cut, came out with a surprising statement that the government cannot pressurize the Japanese assemblers to slash prices as they are multinationals and the country cannot afford to give any negative signals to foreign investors, specially to Japanese, who have been very supportive all along. He said that the car assemblers are not like the Pakistan Steel or the Machine Tool Factory where he could dictate the change in management if they fail to oblige or ignore the government’s advice. If the government pressurized the MNCs it would become an international issue which may hamper future investment in Pakistan.

However, the car assemblers, who gave no importance to previous warnings by the government are relaxed this time as well, knowing that the government will not take any action which would threaten their profitability .

Besides, it is also clearly evident from the nomination of the task force members that the move is yet another attempt to save the ministry and the assemblers from public criticism.

The President, Karachi Chamber of Commerce and Industry (KCCI), Mian Nasser Hyatt Maggoo, has urged the government that the said task force should be reorganized and a nominee/representative each from the KCCI, the FPCCI and the auto car dealers be taken on the said task force along with officially deputed personnel of the ministry of finance and industry.

He suggested that in order to wipe out the element of malpractice and profiteering in car business, the government should take a prudent step by reducing the customs duty on the import of cars. He said that the booking of new cars is being made for delivery of one to two years later.Even a leading assembler has stopped new booking of cars and other companies may follow suit. He added that full payment was being made to auto car dealers at the time of bookings which indicated that the auto industry was secured at least for two years.

The auto sector had witnessed a marked growth of 48 per cent in the fiscal year ended June 2003. Cheap car financing by the banks and the leasing companies, the abundance of new models and heavy arrival of home remittances were the main reasons in boosting the demand of cars.

As a result, many assemblers had to start double shift to meet the demand. If the current buying euphoria continues,the current financial year is all set to end on a good note.