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Automakers divided over impact of relief

Updated January 24, 2019

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trade and industry leaders took keen interest in the mini-budget announcement on Wednesday. Here a group of businessmen at the Hyderabad Chamber of Commerce and Industry listens as the finance minister spells out the incentives for business.
trade and industry leaders took keen interest in the mini-budget announcement on Wednesday. Here a group of businessmen at the Hyderabad Chamber of Commerce and Industry listens as the finance minister spells out the incentives for business.

KARACHI: The local auto industry was divided on the withdrawal of the ban on non- filers purchasing new cars.

Allowing non-filers to buy vehicles up to 1,300cc vehicles will mainly benefit assemblers of Suzuki and Toyota vehicles, many of them told Dawn, adding the decision did not bring any relief to the assemblers of heavy commercial vehicles (HCV).

Finance Minister Asad Umar in his speech said that with the leverage of allowing purchase of locally manufactured cars up till 1,300cc capacity, non-filers will be required to pay higher taxes.

Taxes on cars with engine capacity of 1800cc and above have also been increased. Assemblers said that the details of increase in tax on non-filers are yet to be revealed.

“We had strongly urged the government to remove the ban on non-filers for all vehicles but the mini-budget had ignored the HCV segment,” Director General Pakistan Automotive Manufacturers Association (PAMA), Abdul Waheed Khan said.

He was of the view that the non-filers are already identified and are paying extra taxes. Besides, all the assemblers regularly provide details of their sales to filers and non-filers to the government.

“When a non-filer can easily buy costly luxury items and accessories like watches, jewellery or household items, then why the government wants the automobile sector to suffer by barring them from purchasing vehicles,” Waheed said.

Meanwhile, an assembler said Honda Atlas Cars (HAC) may face problems as it rolls out above 1,300cc in Honda Civic and City models.

A heavy vehicle assembler said, “Our industry may remain in despair as truck sales have already been on the decline for the last six months compared to the improved sales of buses.”

CEO Master Motor Corporation, Danial Malik, while claiming the overall budget was good and pro-industry, said all trucks should be allowed for non-filers since they move the basic economy.

He said the greenfield investors in auto sector should also be given a 10 per cent sales tax reduction on machinery imports.

Spokesperson of Pak Suzuki Motor Company Limited (PSMCL), Shafiq Ahmed Sheikh said production and sales of 800-1,300cc would boost and the vending industry would flourish. The ban on these vehicles from July 2018 had hit the PSMCL and their vendors hard.

An analyst at Top Line Securities said allowing non-filers purchasing motor vehicles 1300cc and below would prove positive for the local auto sector’s sales volumes as approximately 75 per cent cars are 1,300cc or below.

This will likely have a 2-5pc impact on the net earnings of the auto assemblers.Duty on cars above 1800cc has been increased which would prove positive for Honda Atlas and Indus Motors as this would discourage imports of 1,800cc above cars, he said.

Published in Dawn, January 24th, 2019