KARACHI, Aug 29: The sales of automobile, both imported and locally assembled, is expected to decline by 30 per cent in 2008-2009 as government is harmonising its policies with its dislike for luxury spending, coupled with inflationary pressures in the economy.

The auto sales, both imported and locally assembled, had registered a fall of 14 per cent in 2007-2008, an analyst at the JS Global Capital Limited said.

Declining sales and rising input costs, amid depreciating yen and surging steel prices, will cause earnings of some leading car makers to decline in 2008-2009.

He said local assembling companies have passed on the impact of five per cent federal excise duty and one per cent rise in general sales tax to consumers by raising product prices.

In addition, the government had imposed withholding tax and luxury tax on registration of vehicles, thus increasing the vehicle buying cost significantly.

Moreover, rising interest rates have substantially increased auto financing which constitute 60-70 per cent of total auto sales.

The analyst said the year 2007-2008 depicted a massive decline of 54 per cent in import of vehicles after the government reduced age limit to three from five years.

In budget 2008-2009, in line with its policy of discouraging luxury imports, the government increased the customs duty on import of vehicles by 10 per cent.

Moreover, five per cent FED and one per cent additional GST was also imposed on imports.

Recently the government imposed 50 per cent regulatory on import of vehicles between 1,800 and 3,000cc which will result in decline of imports by 29 per cent which might bode well for the local industry, the analyst said.

All-Pakistan Motor Dealers Association chairman H M Shahzad said that the government had issued a mini-budget by imposing 50 per cent regulatory duty on import of luxury cars.

He urged the government to immediately withdraw the duty as cumulative impact of duties and taxes on car imports had surged to 212 per cent from 150 per cent.