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No impact, say most new entrants to auto sector about non-filer ban

Updated September 26, 2018

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File photo of a car passing a sign advertising tax return services in Falls Church, Virginia April 8, 2010.— Reuters/File
File photo of a car passing a sign advertising tax return services in Falls Church, Virginia April 8, 2010.— Reuters/File

KARACHI: New entrants to the auto sector are divided in their views of what the restriction on non-filers of tax returns means for their industry.

Out of those that Dawn spoke with, some showed anxiety foreseeing a tough future environment while others were confident that the situation will come under control in the long run.

The PML-N government imposed a restriction on non-filers of tax returns from purchasing new cars in the Finance Act 2018-19, but the amendments to that act introduced by the PTI’s finance minister will reverse the decision, if passed.

Commenting on news that the PTI government is again reviewing its decision, a senior executive in Hyundai Nishat Motors said: “We are neutral so far — neither against it nor in favour”. Though, he added, the measure could “serve as an encouragement for people to file tax returns.”

The company’s plant in Faisalabad is being set up in collaboration with Sojitz Corporation of Japan, Millat Tractors Ltd and Nishat Mills and will create 400-500 direct jobs.

When asked about a possible shrink in market size in case non-filers are barred from buying cars and light commercial vehicles (LCVs), he pointed to “soaring demand”, adding, “The car and LCVs market will surge to 400,000 units from 200,000-250,000 after arrival of new entrants.”

Current import of used cars and other vehicles is estimated at 60,000-70,000 units a year. “The market has enough demand to cater to new as well as existing assemblers. The non-filer ban is not likely to change that,” he observed.

An official of a Dubai-based new entrant in greenfield automobile project in Faisalabad sees a short-term impact on vehicle sales on restricting non-filers from purchasing vehicles, but adding that in next two to three “the issue will settle down and stability will prevail in the auto market.

“We are currently not worried over non-filer issue and our plans are intact,” he said, anticipating better days of auto sector when the issues of long delays in getting vehicles deliveries and premium will also die their death on heating up competition among new and old players.

The company — with a cumulative investment of $300 million — plans to start local assembly of vehicles after two years, aiming to take a fair market share, the official said.

However, Khalid Mushtaq Motors CEO Anwar Iqbal said fears loom in case non-filers are permanently put on hold to buy cars and other vehicles as it will cut the market size due to possible reduced sales and create problems to achieve sales target.

“I fail to understand why the government is specifically targeting the auto industry to improve tax net,” he said, adding that despite fear of restriction on non-filers “our plans have so far been intact.”

Another big entrant, who asked not to be named, said so far there is no immediate issue for a new player but definitely non-filer restriction will cast shadow on the sales and growth of the industry.

Pakistan Automotive Manufa­cturers Association (Pama) Director General Abdul Waheed Khan said there was a commitment under the Auto Policy 2016-21 that tariff and policy measures would remain unchanged for five years.

“So there is no chance of any midway change in the already approved policy unless discussed and agreed by the auto sector stakeholders,” he said. “Any change in the policy is a clear violation for the new and existing investors.”

Pak Suzuki Motor Company Ltd spokesperson Shafiq Ahmed Sheikh said “putting a complete ban on non-filer to buy car is not the solution.”

“Our advance booking of Suzuki vehicles up to 1,000cc fell by 42 per cent during July to mid-September period due to ban on non-filer to purchase cars,” he claimed.

Published in Dawn, September 26th, 2018