KARACHI, Dec 21: The import of used cars is picking up after the 2005-06 budget and the trade policy incentives, as the high class buyers developed a taste for foreign cars. The liberal policy for import of used cars has eased the demand for locally assembled cars and brought down the premium on these vehicles.

However, a leading car assembler believes that the premium rates on locally made cars have been falling owing to increase in production and improved supplies from the local industry.

According to Karachi Motors Dealers Association (KMDA), as many as 8,000 used cars of 650cc to 3700cc, including jeeps, vans, pick ups, and sports utility vehicles under transfer of residence, personal baggage and gift schemes landed in Pakistan during July-November 2005, which is much higher as compared to a total of 8,700 cars and other vehicles imported during the whole of 2004-05.

Chairman KMDA, H.M. Shahzad, said that a ship carrying some 2,200 used cars would berth at the port on December 26, while some 2,400 cars had already arrived on December 6.

“Market is now witnessing a change and many buyers, having a wide choice now, are inclined towards two to three year old imported cars,” he said adding that there is no problem of spare-parts and after sales service for buyers of the imported used cars.

He said that the increased buyers’ liking for the imported used cars has resulted in slashing premium rates on locally produced cars.

Shahzad claimed that the premium on Honda City was now, hardly, Rs25,000 to Rs30,000, as compared to Rs80,000 to Rs100,000 prevailing before the budget, while there is virtually no own money on Honda Civic these days.

Premium on Mehran is Rs25,000 as compared to Rs 40,000 in July-August, while Rs35,000 is being charged on Alto as against Rs50,000 earlier. Premium on Cultus ranges between Rs42,000 and Rs50,000 now-a-days.

He claimed with authority that premium on Corolla Xli has declined to Rs45,000-Rs50,000, as compared to over Rs100,000 ahead of the budget and trade policy, while premium on Santro is Rs35,000.

As the market is now wide open for buyers, it is clear that the imports have not threatened the financial viability of any local car industry. Assemblers are still doing a roaring business riding on the back of huge demand triggered by attractive auto financing packages by leasing companies and banks, he said.

However, a random market survey reveals that the premium on Mehran ranges between Rs10,000-Rs25,000 depending on the petrol and CNG version, while on Alto it costs a buyer Rs10,000 to Rs30,000 and on Cultus it hovers between Rs30,000-Rs40,000.

In case the import of used cars gains momentum, premium rates will further fall, KMDA chairman said.

Market sources said that the delivery schedule of newly booked cars still ranges between two months to six months despite increased production of cars in the country. Even the premium on the locally assembled cars, which has definitely fallen, still exists despite tall claims made by the assemblers that it would disappear within six months or a year.

Consumers can now witness used Toyota Vitz in large numbers besides, sports utility vehicles and jeeps and even Mercedes, BMW etc.

General Manager Marketing, Pak Suzuki Motor Company Limited (PSMCL), Ashfaq Hussain, said that the arrival of imported cars could be a very minor reason for bringing premium down on locally produced cars, but the main reason for the decline is, actually, streamlining of production process and increased supplies of cars from the producers.

He claimed that the demand and supply gap, which used to be 20,000-30,000 units six months ago, has now dropped to 10,000-15,000 units per month due to massive expansion plans of the assemblers to increase their production capacity.

He said 90 per cent of cars were being delivered in two to four months time, while only 10 per cent brands or versions have around six months delivery schedule.

The total production of cars and light commercial vehicle, during calendar year 2005, is estimated to touch 170,000 units as against 129,000 units in 2004, while the assemblers hope to cross the production level by 200,000 units in 2006, Ashfaq said.

He said the rising supplies would further reduce the premium on new cars, automatically. However, he sees the current buying euphoria among buyers for used cars, as a temporary phenomenon, as these buyers will be seen running from pillar to post for spares and after sales service, when the used cars will develop technical problems. Besides, there is no resale value of these cars. Technicians and car mechanics do not have the required know-how and technical expertise to handle a different kind of engine.

On the contrary, the buyers of newly imported cars, currently being distributed by the local assemblers, have some satisfaction as the assemblers provide full assurance of spare parts’ availability and after sales service, he said.

The car assemblers rolled out a total of 58,832 units in July-November 2005, as compared to 45,344 units in the same period of 2004. It shows that that the consumers are still eager to buy locally assembled cars despite rising imports of used cars. Besides, the local assemblers have yet to feel the pinch of the post-budget and trade policy scenario regarding rising import of used cars. On the other hand, they have also aggressively started importing new imported cars.

They have already stopped booking cars directly from the individuals on cash basis and they prefer to deliver their product through car leasing companies and banks or catering directly to the corporate sector clients.