KARACHI, Feb 13: The Cabinet's decision to approve new and old car imports have caused fall in premium prices on new cars and consumers have adopted wait and see attitude towards booking of new cars.

Market sources said that premium on Suzuki Mehran 800cc fell to Rs15,000-20,000 from Rs25,000 last month, while on Cultus it now ranged between Rs25,000-30,000 from Rs35,000-40,000. The rate of premium on Alto was in the range of Rs10,000-15,000 as compared to Rs20,000-25,000.

Premium on Honda City declined to Rs70,000 from Rs80,000- 90,000 last month followed by fall of on money on Honda Civic to Rs100,000-90,000 from Rs120,000-125,000.

In Toyota Corolla, the premium on 1.3 XLI and GLI models had dropped to Rs100,000 from Rs125,000 while on diesel the on money was Rs120,000 from Rs140,000.

Meanwhile, Chairman, All Pakistan Motor Dealers Association (APMDA), HM Shahzad gave a different view on premium prices. He claimed that premium on Mehran 800cc car had plunged to Rs30,000 from Rs42,000 followed by decline in on rate of Cultus to Rs40,000-45,000 from Rs65,000. He said that premium on Suzuki Alto 1000cc had fallen to Rs27,000 from Rs37,000.

Premium on Honda City had dropped to Rs40,000 from Rs80,000 while on Honda Civic the on rate had now settled at Rs60,000 from Rs120,000. Premium on Toyota Corolla diesel models ranged between Rs55,000-60,000 as compared to Rs130,000, he further claimed.

The local car market has started feeling the impact despite uncertain and confusing situation over the actual cut in import duties on used cars (depending on makes and models) and on new cars of 800cc since much depends on the recommendations of the committee, to be set up by the prime minister shortly.

An executive in a Japanese car industry agreed that flow of people, enquiring about the new cars, have dropped by 20-30 per cent in the wake of Cabinet's decision.

Market sources said that many customers, in hunt of new cars, have put on hold their plans to buy a new locally assembled cars and they have decided to wait till the committee, to be set up shortly by the prime minister, will suggest the cut in rate of duty on reconditioned cars depending on makes and models and on CBU cars of small engine capacity.

However, HM Shahzad was of the view that the government should set up the committee as early as possible so that the Cabinet's approval to reduce rate of duty on new and used cars could be implemented with full force.

He said that the car dealers are anxiously waiting for the government's next step towards the fixation of duty structure on car imports. The Cabinet's decision, however, has drawn a mixed reaction among the businessmen.

The chairman, Karachi Stock Exchange (KSE), Arif Habib has termed the approval to allow used car imports as a major setback to the investment in local auto making industry. In a statement, he said the import of used cars would create a serious negative impact on the industry as well as general investment.

However, he was satisfied with the government's decision on reducing import duties on CBU cars and CKD units of cars of lower engine capacity, which will help bring down the price of these cars to the benefit of small and medium consumers.

Recently, all the car makers have increased their production capacities, resulting in easing of demand and supply gap and cut in premium.

He called for creating competition in the automotive industry to bring the prices within the range of consumers as well as ensuring timely car deliveries. However, the negative factors of the industry due to charge of premium and delays in deliveries should be addressed separately by introducing appropriate monitoring policies.

Members of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), in meetings called in Lahore and Karachi, have expressed dismay and surprise over the decisions of the federal cabinet to consider reduction of duty on CKD and small car imports.

The members said they were already under tremendous pressures due to high price of raw materials and the government's decision would stop further investments in auto sector and job creations.

The vendors had created over 40,000 new jobs in the last two years. The members said the import of reconditioned cars and reduction of CKD tariff would stop future localization along with wiping out the advantage to make auto parts in Pakistan, says a press release of PAAPAM.

Only a few hundred persons were affected by the delivery time of vehicles, but the government's action would result in retrenchment of thousand of workers. Chairman PAAPAM, Syed Nabeel Hashmi, chairing a meeting in Lahore said the proposed government's plan would only benefit industries outside Pakistan.

Nabeel also stated that they fully supported the government's demand to increase production of vehicles and in this the vendors had fulfilled their part by supplying any number of components that were demanded by the car manufacturers, who also had increased their production through double shifts.

This decision came as a surprise to the industry, which was welcoming further increase in demand and was increasing capacity and production with constant growth.

He disagreed with the concept of CKD duty cut, and expressed the hope that the new committee would take vendors into full confidence before giving its final recommendations.

The meeting concluded that these cabinet decisions were totally against the declared policies of the government which included creation of employment, increasing investment and enhancement of local industry's growth.

PAAPAM sees a chain reaction with this policy as all the economic indicators of Pakistan would change and many key associated industries would be affected very soon.

Nabeel also saw vested interests in the import of reconditioned cars and requested the government to be vigilant of opportunists. He also lamented no government action against the actual black marketeers who had been jacking up the prices of vehicles and earning premiums.

In case the government does not reconsider its decision, PAAPAM is expected to issue an advisory to its members to stop all further investment planned in their manufacturing facilities, along with withdrawing all investment plans at the development stage. This in turn would stop all personnel training programmes, which may result in the downsizing of labour force.

PAAPAM chief has requested a meeting with the President and Prime Minister on this issue. The meeting, chaired by Vice Chairman Mehdi Ali Rizvi in Karachi was also heavily attended by the members including Jawed Sheikh, Shariq Suhail, Qamar, and Siddique Memon.

In Lahore, senior members who attended the meeting were Mohammed Saleem, Almas Hyder, Aslam Malik, M. Akram, Razzak Ahmad, Taufiq Sherwani, Chaudhry Hafeez, and Razzak Gauhar amongst others.

Chairman Advisory Board of Korangi Association of Trade and Industry (KATI), Shaikh Manzar Alam, in a press statement, strongly urged the government to implement the decision to allow import of used cars and CBU cars of 800cc as early as possible.

Refusal from local car manufacturers to reduce prices of their vehicles is a manifestation of the fact that they wish to continue enjoying monopoly in this sector of the economy and have no realization of the difficulties faced by the people. Due to their monopoly, the vehicles prices continue to increase every year which runs in millions of rupees, he said.

He said that it is a sorry state of affairs that full advance payment is received from the customer at the time of booking and delivery of vehicle is done after 6-8 months. Hence, the local car manufacturers also earn profit on deposit of this money as they, in connivance with their dealers, sold in the market at a premium.