Indus Motor Company (IMC) has announced that there will be no layoff of employees despite a slowdown in production.
IMC has resumed production to 50pc capacity from October 1 after a closure of 15 days in September.
“The country is going through an economic slowdown and the overall market has remained volatile. This has indeed been a great struggle. The factors largely contributing to this include rupee depreciation, reduction in car financing, increase in federal excise duties (FED) and higher input costs,” said a spokesman of IMC.
He noted that over the year, the rupee depreciated over 31.6pc. Additionally, he added, the government imposed 7pc additional conveyance duties, 3pc additional sales tax on all imports and 7.5pc FED for vehicles of 2000cc and above.
“There is also a fresh FED of 2.5pc and 5pc FED on locally-manufactured vehicles. All this is having an adverse impact on the auto sector and has resulted in a major decline in sales. Of the total cost of a vehicle, 40pc comprises the taxes and levies imposed by the government. It is a misconception that the rising rate of tax collection will not affect vehicle sales and total tax collection; in fact, the decline in sales will result in a decline in tax collection from the auto sector.
“Yet, we have decided not to go for layoffs despite the hard times. We are absorbing this financial crunch,” he stated.
The IMC official pointed out that a general perception exists in Pakistan that cars assembled locally have gradually become expensive without any value addition. The prices of cars have not increased but have been adjusted according to the depreciation of the Pakistani rupee against the dollar. Prices have, in fact, been reduced by the manufacturers but it seems as if they have increased since the PKR is depreciating in relation to the US dollar and the customer is paying more in rupee terms, he added.
The spokesperson pointed out that with every model change, IMC has successfully incorporated more localization, increased specifications and reduced the dollarized cost by procuring local parts worth over Rs200+ million every working day.
He said that in 1993, the price of Corolla was $19,630 with 15pc GST and the PKR value was Rs27 against the dollar. “Now, in 2019, the same Corolla is available for $15,618 despite 17pc sales tax and 5pc FED while the PKR value against the dollar is Rs160. This means better specifications at a low price.”
He said this clearly showed that over the years, IMC had localised more and sustained the burden of heavy taxation and PKR devaluation to keep providing quality vehicles at low prices to its valued customers.