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

Opinion

For whom the clock ticks
Updated 22 Apr 2021

For whom the clock ticks

Tarin will have to succeed in order to cement his position within the cabinet.
Ending the ‘forever war’
Updated 21 Apr 2021

Ending the ‘forever war’

Regardless of who the adversary was at any point, two generations of Afghans have known only war.

Editorial

22 Apr 2021

Capping power debt

THE suggested revision in the Circular Debt Management Plan, which aims to cap the flow or addition of new debt to...
22 Apr 2021

Istanbul postponement

WHILE the postponement of the Istanbul peace talks on Afghanistan, which were scheduled to be held later this week,...
22 Apr 2021

No mining precautions

YET another accident caused by a methane gas explosion has been reported from the dangerous coal mines of...
More mishandling
Updated 21 Apr 2021

More mishandling

By its bad decision-making and weak management, the govt has allowed the TLP to garner more importance and heft than it deserves.
21 Apr 2021

Declining FDI

THE sharp decline in FDI in recent months is worrisome. New State Bank data shows that FDI has plummeted by a hefty...
21 Apr 2021

The digital divide

IN the Economist Intelligence Unit’s annual Inclusive Internet Index report, measuring internet inclusion in terms...