MUHAMMAD YOUSUF SHAIKH
BUDGET SUGESSTION (May 25 2005): Reduction of customs duties on import of automobiles especially on motorcycles and cars is need of Pakistani people to control the market prices and quality.
Pakistan has a growing market for vehicles and accessories (including tractors & motorcycles), offering exceptionally good sales opportunities for world-wide Vehicles.
Exporters in the cars ,truck and motorcycle segments. The total number of vehicles in Pakistan is over 4.9 million units. Annual demand is estimated at 300,000 units of all kinds of vehicle and 500000 units of motorcycles, which is being met from local sources and imports. Total imports are valued at US$300 million.
The local production of after market vehicle parts and accessories is estimated at US$850 million. Four hundred vendors that manufacture vehicle parts and accessories support 25 vehicle manufacturing and assembly facilities in Pakistan.
The vehicle industry demonstrated a very impressive growth rate of 46.7 percent during the past fiscal year, mainly due to growth in demand and the availability of consumer credit and low interest rate loans According to reports the car buyers have availed Rs.22 billion loans from the banks and leasing companies in the first half of the current financial year.
It is quite exorbitant as compared to the total figures of Rs.24.5 billion during full year 2003-04. In 2001-02, the combined net credit by banks and leasing companies was Rs.4.47 billion, while in 1997-98 only Rs.737 million were disbursed for leasing and auto financing of cars.
According to analysts the car financing activities will increase by the end of current fiscal year and the auto loan figure would reach Rs.25 billion in the remaining six months as compared to Rs.22 billion in first half. In other words the total figure could go beyond Rs.45 billion.
This is quite amazing that the government so far hasn't made public the findings of the task force set up in 2003 to examine the cost of motorcars and the profits of the car assemblers.
The black marketing' of locally assembled cars is continued in the country. It is understandable that no authorised dealer worth his name can indulge in the black marketing' of his principal's products without the former's knowledge, consent or tacit approval. This is simply impossible.
It is probably for the first time in the history of the auto industry in Pakistan that automakers are charging the full price of cars in advance, keeping it in their banks to earn huge interest mark-up. By doing so, the automakers on the other hand earn millions in interest/ mark-up from advance payments in billions, while they also charge from the buyer the enhanced price prevailing at the time of the delivery of the vehicle.
This is the reason why the assemblers continue to book orders in excess of their production capacity and without any commitment on the delivery date.
There is no justification for price increase over the past five years. The dollar appreciated in its value by only 15% since January 2000. Besides, when the assemblers have doubled their production capacity, their overheads must have come down. As a result they should have reduced the prices.
The car manufacturers in Pakistan though contend to have achieved a high level of deletion between 40 to 68%, but the actual progress on the deletion program was far below their claims. None of the foreign assemblers had so far cared to attain deletion in high-tech areas of suspension and transmission etc.
Therefore, the foreign assemblers were actually committing a fraud with the nation. Hence, the establishment of car assembly plants in the country was neither in the interest of the government nor the local industry, they added.
According to PAAPAM it was 1985 when certain unfavourable government decisions affected the industrialisation and the localised deletion came to a standstill for the next six to eight years.
To give an example they said; Honda Atlas which is producing motorcycles has localised only 62% of its parts after 30 years, Millet Tractors 70% after 13 years, Pak Suzuki 43% on an average after 16 years, while Messieurs Indus Motors in some models is working as low as 20%.
If the original deletion programme were followed, then in 1988 Pakistan would have had a Pakistani car
In view of these circumstances it is imperative that the government should strictly adhere to the deletion program originally decided, reduce the customs duties and other taxes on imports of brand new cars and motorcycles and also allow import of reconditioned cars from world-wide without letting any grace period to the automobile assemblers.
The auto-parts vending industry of Pakistan constitutes more than one thousand various large, small and medium sized industries that are capable to cater the needs of assemblers while they are already exporting various auto-parts and earning precious foreign exchange to the country.
Copyright Business Recorder, 2004
Pakistan has a growing market for vehicles and accessories (including tractors & motorcycles), offering exceptionally good sales opportunities for world-wide Vehicles.
Exporters in the cars ,truck and motorcycle segments. The total number of vehicles in Pakistan is over 4.9 million units. Annual demand is estimated at 300,000 units of all kinds of vehicle and 500000 units of motorcycles, which is being met from local sources and imports. Total imports are valued at US$300 million.
The local production of after market vehicle parts and accessories is estimated at US$850 million. Four hundred vendors that manufacture vehicle parts and accessories support 25 vehicle manufacturing and assembly facilities in Pakistan.
The vehicle industry demonstrated a very impressive growth rate of 46.7 percent during the past fiscal year, mainly due to growth in demand and the availability of consumer credit and low interest rate loans According to reports the car buyers have availed Rs.22 billion loans from the banks and leasing companies in the first half of the current financial year.
It is quite exorbitant as compared to the total figures of Rs.24.5 billion during full year 2003-04. In 2001-02, the combined net credit by banks and leasing companies was Rs.4.47 billion, while in 1997-98 only Rs.737 million were disbursed for leasing and auto financing of cars.
According to analysts the car financing activities will increase by the end of current fiscal year and the auto loan figure would reach Rs.25 billion in the remaining six months as compared to Rs.22 billion in first half. In other words the total figure could go beyond Rs.45 billion.
This is quite amazing that the government so far hasn't made public the findings of the task force set up in 2003 to examine the cost of motorcars and the profits of the car assemblers.
The black marketing' of locally assembled cars is continued in the country. It is understandable that no authorised dealer worth his name can indulge in the black marketing' of his principal's products without the former's knowledge, consent or tacit approval. This is simply impossible.
It is probably for the first time in the history of the auto industry in Pakistan that automakers are charging the full price of cars in advance, keeping it in their banks to earn huge interest mark-up. By doing so, the automakers on the other hand earn millions in interest/ mark-up from advance payments in billions, while they also charge from the buyer the enhanced price prevailing at the time of the delivery of the vehicle.
This is the reason why the assemblers continue to book orders in excess of their production capacity and without any commitment on the delivery date.
There is no justification for price increase over the past five years. The dollar appreciated in its value by only 15% since January 2000. Besides, when the assemblers have doubled their production capacity, their overheads must have come down. As a result they should have reduced the prices.
The car manufacturers in Pakistan though contend to have achieved a high level of deletion between 40 to 68%, but the actual progress on the deletion program was far below their claims. None of the foreign assemblers had so far cared to attain deletion in high-tech areas of suspension and transmission etc.
Therefore, the foreign assemblers were actually committing a fraud with the nation. Hence, the establishment of car assembly plants in the country was neither in the interest of the government nor the local industry, they added.
According to PAAPAM it was 1985 when certain unfavourable government decisions affected the industrialisation and the localised deletion came to a standstill for the next six to eight years.
To give an example they said; Honda Atlas which is producing motorcycles has localised only 62% of its parts after 30 years, Millet Tractors 70% after 13 years, Pak Suzuki 43% on an average after 16 years, while Messieurs Indus Motors in some models is working as low as 20%.
If the original deletion programme were followed, then in 1988 Pakistan would have had a Pakistani car
In view of these circumstances it is imperative that the government should strictly adhere to the deletion program originally decided, reduce the customs duties and other taxes on imports of brand new cars and motorcycles and also allow import of reconditioned cars from world-wide without letting any grace period to the automobile assemblers.
The auto-parts vending industry of Pakistan constitutes more than one thousand various large, small and medium sized industries that are capable to cater the needs of assemblers while they are already exporting various auto-parts and earning precious foreign exchange to the country.
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