KARACHI, May 11: While the ministries of finance and industries are reported to have locked horn over a proposed cut in import duty on completely built up (CBU) cars in the budget for 2005-06, local car makers try to cool down the heat by urging the government to maintain the import duty on CBU as of last year.
“The government should not disturb the current range of 50-100 per cent import duty on various new CBU cars in the forthcoming budget,” Pakistan Automotive Manufacturers Association (PAMA) Chairman Kunwar Idris told Dawn, adding that this is an official view on the issue as the association chairman.
Giving his personal view on the issue, he said in case the government had plans to cut the import duty on CBU vehicles by some percentage then it should also cut the import duty on completely knocked down (CKD) kits on a same percentage. “The import duty on CBU cars should not be less than 75 per cent,” he opined, adding that this is his personal feeling as the association has not suggested any figure to the government in this regard.
However, he admitted that there were still problems of late deliveries because of demand and supply gap. “That is why the government is trying to encourage the import of CBU to bridge the gap.”
The PAMA chief said things had started improving as cars were now being delivered in two to three months and this period would further shrink in future owing to increased production capacities by the car industry.
Imported cars had failed to attract buyers in a big way and the people now demanded more and more locally-made cars because of parts availability, after sales service and resale value, he said, adding that complaints about low quality of locally-assembled cars had also come down.
“The government should now think about giving more incentives to the local car making industry as any adverse decision can prove destructive not only for the manufacturers but also for the vendor industry that has invested heavily,” Mr Idris said.
It is not clear how much duty will be cut in the new budget, but Industries and Production Minister Jehangir Khan Tareen is reported have said that the government would cut import duty to reduce the gap between demand and supply.
However, the local industry now appears to be quite convinced that the government will not allow the commercial import of ‘used cars’ in the budget 2005-06. The commercial import has been facing a ban since February 1994. Used cars are finding their way into the market under transfer of residence, baggage and gift schemes.
Top executives of the car industry offer different views on the CBU import of cars. An executive in a leading car making unit, who asked not to be named, said that the local industry would not be bothered in case the government cut duty on high engine capacity or above 1,600cc cars.
“The real problem will occur in case the government slashes the import duty on low engine capacity cars. This will definitely hurt the production volumes of the local assembly. I think there is no harm if the government cuts duty on high engine capacity by further 20 per cent. But the industry cannot tolerate a duty cut in low engine capacity,” he added.
In reply to a query that the local industry is engaged in trading and distribution by importing new cars, he said this could be considered as a part-time business of the industry but its real job was to raise production, develop vendor industry and open new job avenues.
He said the local industry imported new cars in fewer numbers of high engine capacity as compared to a number of cars arriving through legal imports.
The executive said that the gap between CBU duty and import duty on CKD kits had shrunk to 15 per cent, taking into account the 50 per cent import duty on low engine capacity cars and 35 per cent duty on CKD kits for local assembly. “The gap between CKD duty and import duty is higher in India, Thailand and other countries.”
General-manager marketing, Pak Suzuki Motor Company Limited, Ashfaq Hussain, said that the news about a cut in import duty on CBU was in the air these days but the local industry was more interested in flourishing the production instead of engaging itself in trading business in a big way.
“The actual demand exists in the locally-assembled cars and not in the imported cars,” he said while referring to the recent import of cars by some companies that are now cutting the prices to lure buyers because of falling demand. Pak Suzuki is also planning to import CBU cars during May-July.
“If the government is more interested in cutting the import duty on CBU cars then the duty should be reduced in a way that could not promote the trading and distribution activities on a large scale. The budgetary step should be aimed at boosting and safeguarding the local industry.”
He said all expansion and production enhancement plans were now well on their targets, thus enabling the industry to roll out cars by over 150,000 units this year and 200,000 units in 2006.
