High demand jacks up import of vehicles, parts

Updated 26 Jul 2018

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KARACHI: Used cars import rise by 6pc in FY18 amid surging sales of locally assembled cars.
KARACHI: Used cars import rise by 6pc in FY18 amid surging sales of locally assembled cars.

KARACHI: The import of used and new cars and bikes coupled with arrival of parts and accessories for locally assembled vehicles remained brisk during FY18, strongly suggesting that demand for both imported and locally-made vehicles remains buoyant despite rising fuel prices and multiple price increases by local assemblers in just one year.

As per the figures of Pakistan Bureau of Statistics (PBS), import of cars mostly three years old rose by six per cent to $456 million in FY18 from $431m in FY17. Some new entrants, who would start assembly in the next one to two years, are also bringing in brand new imported vehicles to test the Pakistani market.

For years, the import policy of used cars is restricted to Personal Baggage.Used vehicles were imported due to shortage of sufficient locally-assembled cars and the fact that many found imported used vehicles to be of superior quality and comfortable.

No previous governments ever studied the quality of locally-produced vehicles and neither did they put any pressure on assemblers to improve vehicle quality. The assemblers made no effort to increase localisation which hovers between 40-70pc.

However, the present caretaker government did not yield to any pressure and had the time to immediately take appropriate measures for streamlining the imports of used cars.

The trade of used cars requires proper documentation that will eliminate the prevailing faulty and illegal procedure adopted by the importers. The government would earn more revenue and have more tax filers.

There is a need to check baggage scheme. Under the present system, it is a practice is to buy the rights of the expatriates. Custom duty is paid in the name of the expatriates and the vehicles are cleared.

Importers need to deposit or transfer funds from abroad and against these funds the used vehicles should be imported. The entire trade becomes legalised and no foreign exchange of Pakistan is wasted.

Importers get registered with the government and a proper purchase and sales of the used vehicles get recorded.

Despite higher localisation, the import of parts and accessories for locally assembled cars went up to by 23pc to $809m in FY18 from $660m in FY17.

Senior Vice Chairman Paapam, Mohammad Ashraf Sheikh said higher parts and kits imports are linked with soaring production volume of vehicles.

He said with rupee falling against the dollar, pressure to localise parts would continue to rise on the assemblers. Around 21pc fall in rupee value against the greenback from December 2017 till to date has also pushed up cost of imported parts and kits.

The arrival of imported of parts and accessories for local assembly of buses, trucks and other heavy vehicles increased by 61pc to $406m from $252m in FY17.

However, the trucking segment enjoyed goods sales in trucks, especially when compared to buses. Import of completely built-up (CBU) buses, trucks and other heavy vehicles had dropped by 26pc to $234m from $316m.

An official in heavy vehicle industry said due to some strict measures by the government, the arrival of used trucks and prime movers has dropped, while some assemblers, who were previously importing CBU units, had switched over towards local assembly especially in below five tonnes truck category thus causing rise in import of parts and accessories. The average localisation in heavy vehicles is 40pc, he added.

Some vendors said they are also dependent on imported raw materials for local assembly of various vehicles as any change in world prices of raw materials and turbulence in rupee-dollar parity hits the costing, thus resulting in price rise of vehicles.

Imports of bike parts rose by 15.5pc to $106m from $92m in 2016-2017 despite claims of achieving 92pc localisation, while import of CBU import of bikes surged to $5.7m from 3.5m, up by 59pc.

Chairman Association of Pakistan Motorcycle Assemblers (APMA), Mohammad Sabir Sheikh said import of over 125cc new Chinese bikes is thriving while some local producers are also importing 250-750cc brand new bikes. Robust sales of locally assembled bikes is pushing import bill of parts and accessories, he added.

According to Faizul Sultan at BMA Capital, Pakistan’s automobile sales experienced decent growth in cars and light commercial vehicles (LCV) segment of 21pc in FY18 on the back of improved buying power amid lower inflation and mutli-year low interest rates.

The launch of new models (Honda’s BR-V, PSMC’s Cultus, INDUS’s Hilux Revo and Fortuner) and low interest rate environment further aided the auto space growth. Heavy commercial vehicles sales also remained upbeat in FY18 underpinned by the China-Pakistan Economic Corridor led theme and pro-agri policies, he said.

Strong growth has enticed ten new ventures to harness the potential of the market, under recent Auto Development Policy (2016-21) which provide incentives for both Greenfield and Brownfield investors, he added.

Published in Dawn, July 26th, 2018