KARACHI, May 2: Consumers continue to show their desire for imported used cars, jeeps, vans, pickups etc., and it is visible from 280 per cent jump in import of such vehicles under various schemes to 27,917 units in July-April 2005-2006 as compared to 7,337 units the same period last year.
The government has netted Rs7.5 billion in customs duty, Rs3 billion in sales tax and Rs1.4 billion in income tax during the period under review as against Rs3 billion in customs duty, Rs1 billion in sales tax and Rs546m in income tax the same period of last fiscal, figures compiled by Appraisement Collectorate revealed.
The collectorate has now computerised the import procedure for used cars by registering importers’ names, passport number and vehicle chassis number.
The collectorate under SRO 179 has also collected Rs55 million from the importers of used cars as a fine who could not fulfil the requirement for their goods declaration on time.
Import of automobiles has already exceeded the $1 billion mark during the last nine months and it is expected to cross $1.5 billion by the end of current fiscal. Auto imports constitute almost 20 per cent of the machinery import group.
As the government is now giving final touches to the budgetary measures for next fiscal (2006-07) to be announced on June 5, car dealers have expedited their efforts in pressurising the government to further liberalise car imports with new incentives and concessions or at least maintain the current policy.
On the other hand, local car assemblers/manufacturers have been lobbying the government to reverse the decision on used car imports and come out with a long- term policy which will encourage the auto makers to further invest in their expansion plans, increase employment and enhance liberalisation.
The import of used cars and other vehicles has been flourishing from August 2005 after the government liberalised import of used vehicles under personal baggage, transfer of residence and gift schemes in the budget in order to curtail the demand and supply gap, high premiums and late delivery problems with locally assembled cars.
As far as premium is concerned massive import of cars has finally resulted in bottoming out premiums on locally assembled cars. The demand and supply gap has remained almost same as market people say it is still 30,000-40,000 units per annum. However, delivery period for high demanding cars still range between three to six months.
No matter how the trade deficit has swelled owing to rising import of used cars and what is its long-term effect on the local assemblers, consumers have got a variety of choices now as previously their wishes to own new car were confined to few models produced locally.
On the other hand, it was presumed that the import of used cars would give a severe blow to the financial viability of the local car assemblers but so far no prominent damage had been done.
For instance, Pak Suzuki sold 86,602 vehicles in 2005 as compared to 65,120 units in 2004. The company’s profit after tax rose to Rs2.237 billion from Rs1.4 billion in 2004. From January 2005, plant capacity had been increased to 80,000 units from 60,000 units. From January 2006, the capacity had been jacked up to 120,000 units. Since December 2003, capacity has increased by 140 per cent. Pak Suzuki has invested Rs3.4 billion in the last two years on expansion, modernisation and balancing.
The board of directors of Pak Suzuki had approved capital expenditure budget of Rs4 billion for 2006.
Sales of Honda Atlas Cars surged to Rs25.6 billion for the year ended March 31, 2006 as compared to Rs16.5 billion in the same period last year. Profit before tax rose to Rs1.1 billion from Rs264 million while the profit after tax surged to Rs705 million from Rs162 million.
The local car assemblers were of the view that used cars were being imported by dealers rather than overseas Pakistanis. The car dealers were not sales tax registered and there was no parts and service availability for used vehicles.
Not only used cars are arriving, some local assemblers have also been in the forefront in bringing costlier cars. For instance, Pakistan would soon witness arrival of Rolls Royce (by the dint of Dewan Farooqui Motors) and one can assume the financial strength of its buyers. The company has also brought German’s BMW and Hyundai luxurious models.
German’s Porsche has already been introduced in Pakistan. Indus Motors and Pak Suzuki have also started distribution business by importing luxurious cars, jeeps and commercial vehicles of higher engine capacity.
