KARACHI, July 7: Authorized car dealers are now witnessing a slowdown in booking of new cars by 30-50 per cent after the announcement of budget 2004-05 that made it mandatory for the assemblers to seek national tax number (NTN) certificate before selling a car to any individual or a corporate buyer.
Dealers said that individual car buyers had disappeared from the market and fresh bookings are only being made by corporate, multinationals and leasing firms. "Fresh car bookings have declined by 50 per cent," dealers said, adding the car market has become uncertain after the June 12 budget.
They said Indus Motors was also verifying the NTN certificate of buyers from the CBR online service and in case of non-compliance, the company was not taking fresh bookings. However, other car makers are taking provisional booking of new cars by asking buyers to present the NTN number at the time of vehicle delivery. In case of absence of NTN card, the car is not being delivered.
Meanwhile, the government on Wednesday resolved a pressing issue relating to the application of the prescribed condition of NTN in respect of advance booking of cars prior to June 12, 2004.
On July 7, the Central Board of Revenue notified: "The condition of NTN will not be applicable in respect of cars booked prior to June 12." However, the local manufacturers-cum-assemblers are still required to sell the vehicle to NTN holders only as per SRO 453(I)/2004 issued on June 12.
Pak Suzuki Motors Limited general manager marketing Ashfaq Hussain told Dawn that 50 per cent fresh booking orders, mostly belonging to individuals, were not coming." Currently, there is no cessation of new car bookings from multinationals, corporate and leasing sectors. However, individual car financing through finance companies and banks has also reduced.
He said that the waiver of NTN condition on car booking prior to June 12 was a welcome step but the issue of NTN was not resolved fully as yet, which was quite evident from a sharp plunge in new car bookings.
He said that the NTN certificate restriction would ultimately result in low production and sales of cars. Mr Hussain said that even many NTN certificate holders were reluctant to book new cars owing to fear of being grabbed by the CBR in the tax net.
He said his company had sent a letter to the CBR requesting to waive off the NTN condition on light commercial vehicles (LCVs) which had almost same buyers like trucks and buses. The government in the last week of June had exempted the NTN condition on trucks and buses sales.
On import duty cut in new cars, Mr Hussain said this move did not seem a real threat to the industry as the price and specification of locally-assembled cars was still very competitive as compared to imported cars. However, real threat will emerge for the local industry when imported cars will land in Pakistan through under-invoicing.
An authorized dealer of Toyota said if a Corolla 1,300cc of same specification of locally-assembled was imported after duty cut, it would sell at Rs1.4-1.5 million as compared to Rs850,000 locally-assembled. The 1,600cc imported car landed price will range between Rs1.5 and Rs1.6 million as compared to locally-made car of Rs1 to Rs1.17 million.
A leading assembler of higher engine capacity car says that the booking of new cars has declined by 30 per cent because of combine factors of NTN certification restriction and a cut in import duty on new cars.
He said the duty on car imports in the country had lowered as compared to India and Thailand. In Pakistan, import duty on cars, ranging from 1,300cc to 1,800cc and above, now hovers between 50 and 100 per cent as compared to over 100 per cent in India and Thailand.
At a time when Pakistan will open its borders for free trade with India under the Safta agreement, the local car industry will find itself in hot waters since the import duty on car imports has already been lowered.
The Pakistan Automotive Manufacturers Association (PAMA) in a letter to the finance minister after the budget disclosed that the import duty on CKD kits in India and Thailand was 20 and 30 per cent as compared to 35 per cent in Pakistan.
The import duty on 1,300cc cars has been reduced to 50 per cent from 100 per cent, which means that the protection to local industry is just 15 per cent keeping in view the import duty on CKD kits at 35 per cent.
The association said that India and Thailand had imposed special restrictions on the import of both new and used cars to further protect the industry. Imports of cars from Korea and other countries at the proposed duty rates will lead to drastic cut in the utilization of even the current installed capacity.
Car makers and vendors may put on hold an investment of Rs10 billion that is in the pipeline for capacity enhancement unless the budget proposals are withdrawn, the PAMA said.