Low localisation pushes up auto parts import bill

Published February 19, 2021
The increasing import bill on account of soaring parts and accessories imports suggests low localisation even by the existing assemblers. — Reuters/File
The increasing import bill on account of soaring parts and accessories imports suggests low localisation even by the existing assemblers. — Reuters/File

KARACHI: Massive imports of parts and accessories by new entrants under duty and tax incentives has caused a whooping jump of 79 per cent in arrival of completely and semi-knocked down (CKD/SKD) kits to $468 million in the first seven months of the current fiscal year (7MFY21).

The increasing import bill on account of soaring parts and accessories imports suggests low localisation even by the existing assemblers. Most of the new entrants are bringing in 100 per cent CKD/SKD under a concessionary regime of the Auto Development Policy (ADP) 2016-2021.

Talking to Dawn, a Japanese car assembler said new entrants are bringing in parts for the local assembly thus putting immense pressure on the import bill.

Local automakers claim high localisation in various models, but new models and variants by existing assemblers are being rolled out with low localisation of parts which is also pushing up imports of parts and accessories.

“This incentive for new entrants may continue till 2026 and they may be able to increase localisation,” the automaker said, adding that the government has given them “duty incentives which they are utilising”.

A new entrant, who asked not to be named, said some automakers have imported kits for production trials which have not shown up in their sales yet.

Chairman of the Pakistan Association of Automotive Parts and Accessories (Paapam) Abdul Rehman Aizaz told Dawn that CKD/SKD imports are rising due to the growth in industry volumes. Higher number of parts are being imported by new entrants due to little localisation as well as owing to low base numbers of last year due to high markup rates and Covid-19, he explained.

According to the Engineering Development Board (EDB), around 20 new investors had been granted Greenfield status under the ADP 2016-21, while two closed units have been revived under Brownfield status. Total investment attracted under ADP 2016-21 is at one billion dollars.

As per the data of Pakistan Bureau of Statistics (PBS), a 42pc jump was also seen in import of CKD/SKD for local assembly of trucks, buses and other heavy vehicles to $163m in the 7MFY21. There was a slight decline in locally produced bus and truck sales to 2,310 units in July-Jan 2020-21 from 2,521 units in the same period last fiscal year.

Imports of new and used trucks, buses and other heavy vehicles had also increased by 47pc to $59m during July-Jan FY21 as compared to same period a year ago.

Imports of completely built up (CBU) cars (new and used) had swelled by 166pc to $116m while bike imports (used and new) also rose by 198pc to $1.8m in the 7MFY21.

With low interest rates and revival in economic activities, sales of locally assembled cars in 7MFY21 rose to 81,569 from 69,189 units in the same period a year ago.

Published in Dawn, February 19th, 2021

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