ISLAMABAD
While new entrants to the local tyre industry should ideally be thrilled at the thought of new entrants, the continued smuggling of tyres across the country’s borders has made life difficult for new entrants into the industry.
Perhaps most emblematic of this systemic smuggling has been the fact that there has been no shortage of tyres in the country, even though the imports of tyres have contracted by around 2.6 million in last financial year due to increase in duties. The increased duties were imposed to encourage the local tyre industry, but smuggling has meant that there has been little to no effect of these new policies to improve the trade deficit.
According to sources in the industry, the imports of automotive tyres were close to 5 million in 2017-18, and after the increase in duties, the imports came down to 2.4 million in 2018-19. Despite this decline of 2.6 million tyres, there was no shortage of tyres in the market.
According to Hussain Kuli Khan, CEO General Tyre, the cut in imports should have been a boom time for the local manufactures but unfortunately it wasn’t. Instead, the gap was filled by smuggled tyres. “How can local tyre manufactures compete when around 30% of duties (custom & regulatory duties) are not paid by smugglers?” he asked.
Talking about new entrants in the sector, he welcomed the new investors in tyre manufacturing, saying the market is big enough for all. He further stated that the influx of new players proves that this sector is viable and growing to attract international players. But he cautioned that the new entrants will face a tough time, especially if smuggling of tyres into the country is not controlled soon.
“The present Government seems determined to curb this menace but it needs to translate its words into action because right now smuggling of tyres is around 65 percent” he said.
He said General Tyre has been fighting a solitary battle in the car and van radial tyres against smuggling and heavy under invoicing. In the farm and motorcycle there are a few other manufacturers.
“We have always advocated that the government must stop smuggling and under invoicing to help the local industry grow. But unfortunately we had very limited success in this,” he added. He said that attracting foreign investors was the easy part.
“Now, the government has to make it a viable market for the new plants by curbing smuggling and under invoicing,” said the manufacturer.
He further stated that in 2017-18 the government raised duties to help local industries grow and this initiative coupled with the Rupee Devaluation cut the imports of tyres into half.
