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Carmakers, vendors resent FBR order

September 04, 2012

-Fle Photo of damaged cars imported from Japan and other countries

KARACHI: Car assemblers and vendors are unhappy over changes in import policy about used cars while importers said that the decision would deprive consumers of quality cars.

PAAPAM chairman Syed Nabeel Hashmi termed the new Customs General Order (CGO) on used car imports an insignificant move for the auto sector, which, he said, would not benefit local industry.

To promote the local auto sector and its vending industry for the time being, the government has to lower the age limit of used cars to three years from five years besides keeping the maximum depreciation allowance at 40 per cent, he said.

“The local car industry will only flourish when import of used cars will completely be banned,” he said, adding that production of locally-made cars has already been facing downward trend in view of parts and accessories schedule given by the assemblers for upcoming months.

Pakistan Automotive Manufacturers Association (PAMA) Director-General Abdul Waheed Khan said that there would no apparent benefit to the industry from the new CGO issued on Aug 31.

“We had never asked the FBR or the government for this kind of CGO,” he said.

PAMA has already demanded complete ban on import of used cars under various schemes because thriving used imports are causing unemployment and losses to vendor industry, Waheed said.

However, General Manager Sales and Marketing, Balochistan Wheels, Shaikh Mohammad Iqbal claimed that import of old and used cars is causing a loss of over Rs16.5 billion to the national kitty.

He criticised the role of used car dealers who claim that they are providing millions of rupees revenue to the government. In fact, they have caused loss of foreign exchange valuing $371 million to the government on import of used cars during the last one year.

Shaikh Iqbal questioned the so-called car dealers involved in import of used cars business on such a large extent while the government has never allowed them commercial import.

He said import of used cars facility is allowed in baggage scheme only for those Pakistanis who are living abroad but surprisingly these dealers have involved themselves in this business by using unfair means and malpractices and thus damaging local automobile industry.

He urged the government to take measures against such culprits.

On the contrary, Chairman All-Pakistan Motor Dealers Association (APMDA), H M Shahzad, in a letter sent to the Prime Minister on Sept 1, said used cars dealers had provided quality cars at competitive rates with no premium, all safety features and accessories besides revenue of Rs33 billion in 2011-2012.

On the other hand, the local automobile industry raised the prices by over 100 per cent in the last four years, taking months to deliver vehicles while their dealers charged premium on spot buying.

He claimed that importers had already stopped clearance of vehicles from the port till the FBR take back the CGO.

He added that the dealers had stopped lifting used cars from Japan, UK and Dubai for onward shipment to Pakistan while vehicles coming through various vessels in high seas will not be cleared at the port.

Zeeshan Afzal of Top Line Securities said that the FBR order has imposed maximum allowable depreciation limit on used cars while it did not change the duty structure and allowable limit.

The CGO would potentially deter import of used cars besides increasing their prices which directly bodes well for local assemblers’ sales.

In FY12, sales of imported used vehicles rose sharply to 60,000 units as against 17,000 units in FY11, while local assemblers sold 179,000 units in FY12 as against 146,000 unit in the previous year.

Customer demand for used car increased due to reduced price differential between local and used imported cars that augmented general preference for imported and luxurious vehicles.

He, however, said that there was still uncertainty regarding duty structure on imported CBUs and duties on CKDs.