ISLAMABAD, June 10: The automobile industry has no plans to cut prices of local vehicles in the foreseeable future but it wants the government to maintain in the next budget existing duty differential between CBU and CKD kits and a clear future policy to protect the industry.
"We have no plans to consider price reduction because we already have absorbed the strengthening of Japanese yen against the rupee in the last few months by keeping the prices stable", said a chief executive of a leading car assembling company at a background briefing to reporters.
Answering a question he said the industry wanted the government to maintain the price differential between completely built unit (CBU) and completely knocked down (CKD) kits and the clear future policy to protect the industry and to attract further investment in the sector.
Automobile industry spurred on by the higher demand of the last couple of years is poised to produce more than 114,000 vehicles in the current fiscal year and cross 200,000 by the year 2007-08.
Currently the there are different duty slabs on the CBUs depending on the engine capacity. These duties vary from 75 per cent to 150 per cent while CKD kits are imported at a duty of 35 per cent. On the other hand the second-hand cars imported into Pakistan through different schemes like transfer or residence and gift scheme are provided 50 per cent duty rebate.
Raza Ansari of the Toyota Indus Motors said there had been a sudden rise in demand in the year 2002 and in 10 year prior to that the demand had been hovering between 40,000-49,000 vehicles per annum.
In year 2002-03 the demand took a sharp upsurge and reached 83,000 and manufacturers had trouble in keeping up with the demand as they are also dependent on vendors and cannot enhance production overnight, he said and added that however the industry responded to the challenge and was able to enhance production.
Giving example of Toyota Indus Motors he said that the company was producing approximately 10,000 units in the year 2001-2002 but within two years it has enhanced production three fold and by the end of the year it will be producing 32,000 vehicles. Similarly other major producers like Suzuki, Honda and Hyundai had also enhanced their production to meet the rising demand.
He also explained various factors that have contributed towards increased demand including stable political conditions, consistency of policies, improving Pak-India relations and influx of foreign exchange reserves.
When questioned about some proposals to reduce duties on both CKD kits and CBU, he said that as long as differential was maintained the local industry was in position to continue its growth, however if differential of duties was changed negatively then some of the manufacturers would definitely not be able to maintain the forward thrust.
Another important issue raised by the industry representative was that reduction of duties on CBUs in no way should encourage import of second-hand cars as by availing 50 per cent duty rebate through different schemes the local market would be flooded with old technology cars.
The government needs to tighten control over the misuse of various schemes through which second-hand cars are imported, he said. The auto industry including the vendors and assembling units has a total investment of Rs52 billion and this is expected to grow to Rs93 billion by the year 2007-08.
The industry provides employment to around 250,000 workers in the country and that figure is projected to go beyond half a million within the next few years if the industry maintains its robust growth.
The industry's revenue contribution to the government exchequer has also seen consistent growth and this year the industry has contributed Rs17 billion to the national exchequer.