KARACHI, Aug 17: Budgetary and trade policy measures for 2005-06, aimed at liberalizing used car imports, have yet to cause a breather in the buying sentiments of consumers of locally assembled cars. As a result, car sales rose by 12 per cent to 11,503 units in July 2005, as against 10,249 units in same month last year.

Issues like late deliveries ranging from three months to six months and even more, high premiums on locally assembled cars (from Rs40,000 to over Rs150,000) and a full payment requirement at the time of booking have been lingering on for the last two to three years. However, the consumers are still in a hurry to have locally assembled cars at any cost that is evident from the persistent rise in sales.

According to data released by the Pakistan Automotive Manufacturers Association (PAMA), car sales in July 2005 posted a drop of 16 per cent over June 2005 sales of 13,668 vehicles.

Faraz Farooq of Jehangir Siddiqui Research said that June 2005 sales were the highest during the fiscal year 2004-05, mainly due to an abnormal sale of 3,038 units (including 1,380 Hyundai Santro units) in June. However, in July Dewan Motors sold only 602 vehicles (278 units of Santro) because of a two-week plant shutdown for maintenance, thereby upsetting the overall sales for July. Moreover, he said that the company had ceased the production of its KIA brand and decided to import completely built up (CBU) vehicles.

Abdul Azeem of Invest Cap said that the decline in car sales from June to July, 2005 (month-to-month) could be attributed to stricter car booking requirements and an influx of imported cars in the local market.

The city’s congested road networks, already overburden with locally assembled, used and new imported cars, now sustain more load with the plying of two-year-old cars of Toyota Platz, Vitz and Deut, Nissan Mini and March, Subaru, sports jeeps, etc., in striking colours and designs. These vehicles have hit the local market recently after the government’s decision relating to cut in customs duty and increase in depreciation allowance to two from one per cent in the budget 2005-06, followed by the trade policy decision, allowing the used car import up to three years under gift and baggage schemes and abolishing mandatory registration clause in the name of importer under the transfer of residence. Besides, Pakistanis holding Pakistan origin cards can also now import vehicles.

However, car names (as mentioned above) are much smaller in numbers against the used car dealers’ anticipation that the market would witness a flood of used cars after the budget and trade policy measures.

Now the importers have changed their stance. “Consumers will witness a variety of used cars by the end of September, as a ship carrying over 1,000 cars will leave Japan for Pakistan in the third week of August,” All Karachi Motor Dealers Association Chairman H.M. Shahzad said.

“Only one ship is arriving from Japan in a month. The number of imported cars in the market would have been different, had two or more ships (car carriers) hit the local port,” he said, adding that if at least two ships carrying over 1,000 vehicles each hit the port in a month then the consumers would see the impact of government’s decision of liberalizing used car imports.

Mr Shahzad said the consumers would have a wider choice hopefully in September to select used cars, but these cars would not be cheaper anymore.

He claimed that 12,700 vehicles (used and new) had already found their way into the local market in 2004-05, and importers look forward to bring 25,000-30,000 units in the current fiscal year.

Market analysts think that issues of availability and cost of spare parts, resale value of used cars and improper dealership networks with untrained labour cause reservation in the buyers’ mind, otherwise people (full of liquidity now) would have preferred buying imported cars. The quality difference between the imported and locally assembled cars is much evident after a closer look at the used imported cars.

They said the industry had only given issues like late deliveries, high premiums on cars and a full payment at the time of booking and even some quality problems to the buyers, instead of addressing these problems. There are no apparent signs that these issues will eliminate from the market in future as cars produced by the assemblers have been heavily booked for the next six to eight months, while supplies are too slow. Attractive packages offered by banks and leasing companies on car financing have caused a demand burst.

Four car makers –- Indus Motors, Pak Suzuki Motor Company, Honda Atlas and Dewan Motors — have pointed out that the government is interested in facilitating overseas Pakistanis, but traders of used cars will misuse the scheme to import vehicles in larger numbers. They said the government should incorporate with some stringent monitoring and controlling system to curb the menace of misuse by car dealers and traders.

They think that the number of imported used cars in the country needs to be monitored closely by the CBR, and a subsequent registration with the provincial excise authorities needs to be properly recorded.

The industry, they said, needed a long-term and consistent policy for the local auto and vending industry in order to eliminate the need of imported cars in future. They said the industry (assemblers and vendors) had planned an investment of Rs80 billion by the year 2010 in capacity expansion projects to meet the incessant demand emerging from the growth of economy.