KARACHI, April 20: Premiums on locally-assembled cars have plummeted sharply on the back of rising import of used cars under various schemes coupled with rising production of cars by the local manufacturers.

A market survey reveals premium on Suzuki Mehran has been ranging between Rs25,000-30,000 compared to Rs40,000-50,000 few months back. On Alto 1000cc it has been hovering between Rs25,000-30,000 as against Rs40,000-60,000. On Cultus it ranges between Rs45,000-55,000 as compared to Rs70,000. Premium on Hyundai Santro has dropped to Rs12,000-15,000 as compared to Rs30,000-40,000.

Premium on Toyota Corolla XLI, which had swelled to Rs100,000 last year, has fallen to Rs35,000-45,000. The on-money on GLI also ranges between Rs40,000-50,000 as against Rs95,000. In middle of last year, it was over Rs120,000. Premium on diesel hovers between Rs10,000-15,000 against Rs35,000-40,000 few months back. It was also as high as Rs70,000 last year.

There has been hardly any premium on Honda Civic and Honda City as the company is planning to introduce a new model in July or August this year.

Despite doubling and tripling the production capacity by the manufacturers in the last one to three years, there has been hardly any breakthrough in the reduction of delivery period. Locally assembled cars, which hold high demand, are being delivered in three to six months time while there has been 15 days to two months delivery time on low demand cars.

Authorised car dealers of local assemblers demand full advance payment on cash booking while there has been restriction of either zero per cent advance payment or 10 per cent payment on cars being booked through leasing and financing companies. Assemblers have been gaining interest for various months on the amount which they gather from the purchasers.

The 2005-2006 budgetary measures had changed the market scenario in favour of consumers owing to a flood of imported second-hand cars, jeeps, LCVs, pickups, vans etc. During July-March 2005-2006 over 21,000 units were imported as compared to 7,500 units in the same period of last fiscal.

The import value of over 21,000 units comes to Rs10.65 billion and the government netted Rs6.25 billion in shape of customs duty only.

All Pakistan Motor Dealers Association (APMDA) chairman H.M. Shahzad talking to Dawn said that the revenues to the government in shape of customs duty, sales tax, CVT and income tax amount to Rs20 billion in July-March 2005-2006 as compared to Rs6-7 billion in the same month of last fiscal.

He said that around 10,000 cars, majority of small engine capacity, would be arriving during April to June and the government would be earning Rs7-8 billion in shape of duties and taxes.

“Local manufacturers are happy as booking orders for new cars continues. They have a booking for next six months in their hands or even more. Demand for both locally assembled and imported vehicles has been rising side by side,” he claimed.

“The only good thing has happened is the availability of a variety of used cars for the customers who earlier were bound to buy only locally assembled cars,” he said, adding that leasing and bank financing companies, which have boosted the buying confidence for locally assembled cars, were now also targeting used and new cars.

For the last many years, Japanese assemblers have virtually dominated the market and they have been too reluctant in technology transfer. They have also been too lethargic in changing the models. Customers are still being offered 1984 model of Suzuki Bolan as 2006, while Suzuki Mehran’s 1989 model has been changed with new headlights and bumpers in 2006’s model. Same trend of maintaining the model for years is being followed in Suzuki Alto and Cultus. Indus Motors took 10 years to change the Toyota model after introducing the first in 1993. Only Honda Atlas has been changing models after every two years.

The only good thing the car and vending industries have given is the opening of new job avenues under their capacity expansion plans otherwise customers know what kind of quality they are getting.

The local car industry people now portray a very depressing outlook in case the new Auto Trade Policy 2006-2007 comes into force. More increase in depreciation rates, more cuts in duties on the import of cars and too many incentives for new entrants will prove devastative to the car and vending industry, they feel.

The assemblers had shown their concerns before Commerce Minister Humayun Akhtar Khan in the advisory committee meeting held last week, an assembler told Dawn.

He said that the industry representatives said that the manufacturers and vendors would be forced to hold back their planned investment of over Rs100 billion by 2010 in capacity expansion projects in case incentives to the new entrants and more import of used cars was liberalised under the new auto policy.

Car makers are targeting to increase the production to 197,000-276,000 by 2007-2008 and 516,000 by 2011-2012.

The real beneficiaries of used car imports are the traders, said local assemblers. “The issues of availability and cost of spare parts, properly equipped dealership with trained labour and adequate resale value of used cars are still there. Imported cars will not have any warranty and neither have they gone through any proper checks to ensure they comply with quality standards,” they added.

They said that the rising import of used vehicles was also contributing in swelling the trade deficit. They urged the commerce minister to provide a long term and consistent policy for maintaining growth of the existing auto industry.

They added that the liberalising of used car imports had deeply hurt the industry. “Countries like India and Thailand support their auto industry through higher tariff on used car.”