Auto industry bands together to demand tax relief 

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ISLAMABAD: The key stakeholders of the auto industry met on Friday to chalk out a plan to be suggested to the government for increasing demand of vehicles without hurting revenues.

Manufacturers of vehicles, under the banner of Pakistan Automotive Manufacturers Association (PAMA) and parts manufacturers under Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), had a crucial meeting on Friday.

According to sources, the two key bodies of the auto industry have agreed to find some sort of solution to this gloomy situation and to table the same to the government for revival of the industry. Insiders claim that the industry may demand government to immediately withdraw the newly introduced Custom Duty and Federal Excise duty in the sector give some relief to the sector.

The meeting between the two key associations has come in the wake of the important meeting held between top business leaders and Chief of Army Staff on Wednesday, in which the army and government representatives had committed to address concerns of the business community.   

The auto sector of the country is in deep trouble these days, with sales and production sliding down by 41.4% as per PAMA numbers for 2MFY20 due to increase in prices, Rupee depreciation, reduction in car financing, increase in Federal excise duties (FED) and higher input cost. September sales numbers are not reflecting sign of improvement, which will add up negative pressure for auto industry.

“Owing to falling demand and higher cost of doing business, the production plants of auto manufacturers have faced shutdowns of more than 30 days,” said a source.

According to Pakistan Automotive Manufacturers Association (PAMA), the sales of cars by Honda declined 68.5% on year on year basis.

Similarly, the sales of Toyota witnessed the decline of 58% and the sales of Suzuki registered a decline of 22.3 percent, thanks to new Alto introduction.

“The consequences of this situation would be holding back of expansion plans by the manufacturers, increase in import bill, loss of employment, negative impact on the localization process in the country, negative growth and expansion etc.,” said the source.

“This crisis has made the auto manufacturers completely reverse their development plans and all the hopes of local manufacturers, new entrants, and the customers dashed.”

He said increase in advance customs duty on all raw materials and imposition of 2.5 to 7.5 percent FED announced in the current budget proved deadly for the industry, besides, he added, huge devaluation of Pakistani currency against the U.S dollar in the recent times has severely affected all future plans of the industry.

“Auto industry development policy predicted the sales to 350,000 cars and 79,000 light commercial vehicles by 2021. A year ago the industry was set to achieve 500K mark by year 2023, however, today the drop in overall economic activity in the country resulted in the sales of cars is expected to touch the figure of 70% this year.

“This situation is very disappointing for new entrants as well, and they are not going to reap what they expected at the time of their investments. $1.5bn was to be invested by new players,” said the source.

This situation has posed a big threat to the employment of the industry as the local auto industry has direct employment of 300,000 and the indirect employment is 2.5 million. However, no OEM has laid off any employee yet.

This gloomy situation is not profitable for the government as well since they would face tax collection shortage of Rs.2 billion per month as a single car’s prices has around 40% of taxes that go to the government.

9 COMMENTS

  1. Well former Govt. Gave too much leverage to companies working in Pakistan, Govt should pursue current companies to build and manufacture auto mobile within the country besides assembling and burdening economy by heavy import bills..

    • These big 3 must sink in their own. Even after more than 25 years of selling scraps to Pakistani people, they are still just car assemblers.

  2. The UN/WHO Decade of Road Safety will end in 2020, focused on Road Safety, as the Road Accidents worldwide has the highest number of injuries//deaths, Pakistan being member of WHO/UN has to address MOST essentially to reduce Accidents/Injuries by road accidents. The UN recommends Bicycle Track comply with Global Climate Change compliance to STOP cars/motor cycles induct buses, based on Hybrid/EV model assembled/made in Pakistan. Our skies are hazy, with carbon emissions, foot path used for car/moor cycle parking. Where would people walk. How can people cross roads? The UN/WHO study for Climate Change recommends STOP cars/motor cycles. Use buses, make buses, form JV with Volvo which is very keen for Pakistan market as JV, for home market and exports to regional markets as China with bilateral treaty from pakistan. The PAMA members should now evaluate/consider for software for substituting engines to EV with NI-mH (Nickel Metal Hydrite) batteries a Joint Venture for local manufacturing/exports from Pakistan for Battery manufacturing for today/future technology for scrapping the ICE (Internal Combustion Engine) to the scrap yard. No one on earth will buy todays cars. Please form joint venture with Buses, Mobility, for Pakistan and exports worldwide.

    • This cartel of automobile assemblers should learn the lesson as they are looting billions of rupees from people of pakistan by selling outdated and obsolete cars. They must know that now Pakistanis don’t want to buy these cars which are already been discontinued in entire world.
      Suzuki by chance introduced one generation old alto just before this prevailimg recession and figures show that sale of alto is promising even after its price has been increased twice in a month.
      This car mafia should learn the lesson that if they offer better quality cars people still buy those. But if they offer only face lift of their respective models then there is no point in buying new car with same old technology in such a hefty price which one is already using.

  3. Seriously. why aren’t these Japanese goons decreasing their prices, Car prices have increased to almost 50 on every model, and still the writer thinks its the Govt fault that auto industry is going through crisis. the amount of localization obtain by these morons in 40 years is just manufacturing of Plastic bumpers, Tyres, seat covers and some filters or may be some shit stuff, they will never transfer the entire technology to Pakistan. i think we should completely ban these Japanese blackmailers triad.

  4. They used term light commercial which is very wrong syntax word is poor quality in high price we are helpless no authority to check zero quality in all means its better to complete shut down

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