November 12, 2003	Wednesday	Ramazan 16, 1424

LAHORE, Nov 11: Supply of cars in the market, at least in the provincial metropolis, is stated to have surpassed demand due to what assemblers call over 60 per cent increase in their output this year as compared to last year.

“Visit the showrooms on Jail Road and elsewhere in the city and you would find the showrooms brimming with cars waiting to be sold. Why? Simply because of higher output, and supply,” a senior executive of a car manufacturing company told Dawn on Tuesday. On the other hand, he said, there was little or no evidence that the “market was growing as fast as car production.”

Some major car dealers on Jail Road confirmed that the “supply had actually surpassed the demand in the recent weeks.” But, they said, “hopes generated by unconfirmed reports that government may slash import tariffs may also have contributed to sluggish market to some extent.”

The executive, who asked not to be named, admitted that “sales had also dropped because of the uncertainty caused by unconfirmed report that the task force on automobile industry has recommended reduction in car import tariffs to make local producers cut their prices.” But, he hastily said, it had not produced as much impact on sales as increased production by the assemblers.

He said the “manufacturers had raised their output despite the fact that there is no concrete evidence as to whether the current boom in the industry would last for long. So far, we’re not sure that it would last very long. Yet we have increased our production for meeting the growth in demand during the last couple of years.”

The task force was set up to study automobile prices, premiums charged on new cars, delays in their delivery, and possibility of lowering import tariffs of new and reconditioned vehicles after a protest by legislators in the National Assembly around two months ago.

The task force has already submitted its proposals. Industries and Production Minister Liaquat Ali Jatoi had told reporters only a few days ago that the cabinet would take a decision on the report shortly. However, he refused to divulge whether the task force had recommended reduction in import tariffs.

An executive of another car manufacturing company said the car industry was reacting quite “cautiously to the current impasse”.

“Everyone has put on hold even the actual investment plans because of uncertain situation caused by the constitution of the task force on the insistence of some legislators. Now we’re pursuing a policy of wait-and-see,” he said.

The car prices were a “non-issue” in the present scenario, the executive said. “We’ve clearly explained to government that we’re cheaper in the region, and given evidence to support this stance. There is no scope of further reduction in the prices. There is no room for slashing the prices any further.”

“The real issue involved is whether the present auto policy would be allowed to continue to protect the domestic industry? Whether the tariff protection would remain in place?,” the executive said.

He insisted that it was incorrect to assume that import of the cars would benefit common man. “Only the privileged ones would be benefiting from such a disastrous decision,” he said. “Because of the high output than the market demand, the premiums on cars have already drastically come down while the wait period has also been reduced. So importing cars is not the solution to the problem. It lies in supporting local industry, helping it attain economies of scale, increase efficiency and putting in place effective laws to keep investors from taking advantage of increased demand.”

He claimed that the “revision of the present auto policy would send a wrong signal to foreign and local investors. It would be disastrous for local car makers who have tripled their production in three years and are on their way to achieve economies of scale and higher deletion levels. Vendors would be the main sufferers.”

It may be recalled that the PAPAAM has opposed any revision of the auto policy and lowering of import duties in order to protect the domestic industry.

A vendor warned that any negative decision for the auto sector would unleash another crisis for the government which was already making efforts to control crises in textile and sugar industries. “The whole GDP growth projection for 2003-04 would crumble if a crisis in the auto industry is allowed to be created.”