KARACHI: In a bid to appease the local assemblers, the government has abolished customs duty on the import of hybrid cars and luxury electric vehicles (EVs). The decision has irked used car importers, who said that it would benefit the assembler of these vehicles rather than consumers.

On the other hand, the local assemblers of hybrid vehicles must be satisfied as their meeting with Prime Minister Shahbaz Sharif a few days before the new budget paid off.

The government gave concessions on the import of hybrid vehicles in 2013 to end the huge price difference between hybrid and fossil fuel vehicles. Now, the price difference has shrunk and the assembly of hybrid vehicles has kicked off. As a result, exemptions are being abolished to promote the local industry.

The government said the reason for taking back concessions on luxury EVs is that the users and importers of $50,000 worth of imported EVs should pay taxes and duties.

Shift to basing advance tax on value of cars, rather than engine capacity, could alter pricing strategies

Arif Habib Limited (AHL) said that removing customs duty exemption on completely built-up hybrid vehicles is expected to raise demand for locally produced hybrid vehicles.

The shift to basing the advance tax on the value of cars rather than their engine capacity could alter pricing strategy. Removing tax exemptions on the import of luxury EVs may prompt affluent buyers to opt for domestic purchases instead of imported ones.

“The government is openly giving protection to a few assemblers who have rolled out costly hybrid vehicles in the name of higher localisation,” said Chairman All Pakistan Motor Dealers Association HM Shahzad.

Rejecting the local auto industry’s impression of being manufacturers, he said, “They are actually assemblers depending on the import of auto parts and accessories for decades as they have not done any higher localisation.”

He said the government has given incentives to assemblers who have been assembling vehicles rather than manufacturing for the last 40 years.

The prime minister was informed that local manufacturers continued to strive for increased localisation of parts, and further government support was requested to encourage and establish small and medium industries in the country to provide parts’ raw materials.

Indus Motor Company (IMC) CEO Ali Asghar Jamali recently claimed that Toyota’s newly launched Hybrid Electric Vehicle, the Corolla Cross, has the highest percentage of localised parts in this category (over 50 per cent), and its first quarter performance was satisfactory.

IMC has strived and preferred to source and procure its parts locally in collaboration with its vendor partners, he added.

Local part maker and exporter Mashood Ali Khan has hailed the government’s decision to discourage the import of luxury vehicles as a positive step.

He said measures were expected to be introduced to enhance the production of trucks and buses, but the government continues to import buses for the local transport system, thus wasting precious foreign exchange.

He said the FY25 budget is silent on incentives for small cars, which are used by members of the middle and upper middle-income group. The budget also falls short of any measures to promote small and medium enterprises.

Auto sector members in the local assembly did not respond to the budgetary measures for the auto sector.

Published in Dawn, June 13th, 2024