LAHORE: As the coronavirus pandemic wreaks havoc on the economy and hits car sales, the country’s auto sector has sought immediate government attention including a stimulus stimulus package to deal with the impact of the pandemic and lockdown.
Talking to this scribe, Nishat Hyundai Motors Private Limited (HNMPL) Chief Financial Officer (CFO) Noreez Abdullah said that these are unprecedented times over generations and to counter them, an equally unprecedented courage, patience and cooperation is required. He added that COVID-19 has proven to be a sucker punch for the auto industry and for new entrants, its timing could not have been worse.
“There is very little to complain to anyone during the outbreak however what does concern us is how the government would set its priorities to recover from the fallout and generate demand after the post-crona situation,” Abdullah added.
He maintained that the auto industry would require special attention of the federal government to restore to its normal. The car manufacturer said that the value chain is extremely labour intensive and the industry has urged the government to break the status quo which has already hit the demand and created an industry wide liquidity crunch. He shared that the industry outlook kept on getting weaker even before the lockdown occurred.
The CFO also demanded the waiver on minimum turnover tax for greenfield projects, the removal of Federal Excise Duty (FED) on sales and reduction of sales tax on imports. He also stressed the government for special rate incentives from State Bank of Pakistan (SBP) for plying new commercial vehicles to replace the older ones that will help save the environment as well. He further demanded the government to shelve all new policies relating to the industry.
Meanwhile, Head of Public Relations and official spokesperson of Pak Suzuki Motor Company Limited (PSMCL), Shafiq Ahmed Shaikh said that the industrial production of the automobile sector remained in distress during 9MFY20 with a massive fall, close to 50pc, as compared to the last year.
Shaikh added that the current year started with a squad of new taxes like imposition of federal excise duty (FED), Advance Customs Duty (ACD), minimum value addition tax, while the exchange rate also kept escalating during the year. As such, there was industrial fall month in, month out that 9MFY20 ended with a decline in each sector of the auto-industry. The spokesperson said that the Covid-19 outbreak has made the things from bad to worse.
“Since March 21 like all other sectors, the auto industry also came to a complete standstill due to lock down. With no end in sight, it is not clear how long this crisis will continue. This lock down situation will make things even worse for the industry,” he noted. Shaikh maintained that Pak Suzuki sales, production and aftersales operations have remained suspended since March 21. Similarly, authorized dealerships and auto parts manufacturers’ businesses have also remained closed.
He opined that the financial crunch is crippling the business, as there is no sales activity taking place due to lock down since mid March 2020, but Pak Suzuki is making payments for orders already placed with local and foreign suppliers.He added that in addition to fixed costs, payments of wages and utility services have to be made in time.
He noted that the dealerships and auto parts vendors are suffering the most, as it is very difficult for them to make these huge payments without any sales receipt, hence, some of the small dealers and vendors are now on the verge of bankruptcy.
The spokesperson shared that there has been fall all over the local auto industry during the current financial year.He said that demand for Pak Suzuki passenger cars andLight Commercial Vehicles (LCVs) plunged by 38.5percent and 59 percent respectively in 9MFY20 as compared to last year.
Shaikh said that in March 2020 alone, the sales of passenger cars plunged by 79 percent to 2,380 units compared to 11,707 units in March 2019, primarily due to general lock down to counter the coronavirus pandemic.
He shared that in the month of April, so far no sales activity has taken place due to lock down. Due to this crisis, the auto industry is going to incur heavy losses during the year.
The PSMCL spokesperson feared that as the impact of Covid-19 pandemic crisis is likely to continue in coming months, there is no respite from these woes; there would be inevitable question of proportionate cost push of products in wake of such massive fall in production due to idle capacities, besides, the cost build up due to unsold inventories and high exchange rates. He demanded that it is time that the government may look into problems of this very important industry and provide support and remove irritants through a stimulus package.
Shaikh said that Pak Suzuki has already been on a downward trajectory since the beginning of the current fiscal year due to economic factors, changes in policy for the auto sector and imposition of additional taxes, duties and ever increasing cost of production due to depreciation of the Pakistani rupee. He added that the outbreak of COVID-19 has now led to complete shutdown of plants and offices. He added that Pak Suzuki believes that the revival of the auto sector through tax incentives and other relief measures is the need of the hour as the auto sector is the major contributor to Pakistan economic DP, tax revenue and employment generation.
“We request the government to take measures for the survival of the auto industry,” he said. Shaikh requested the government that on Cars Complete Knocked Down Units (CKD), import duties should be 10 percent from current date to December 2020 and no change in duty rate of localised CKD. He also demanded removal of FED on locally manufactured motor vehicles and minimum tax u/s 113 should be reduced from 1.5pc to 0.25pc for automobile manufacturers and their vendors and dealers, due to economic slowdown and stoppage of their business.
He further requested the government that general sales tax (GST) should be reduced by 50pc from current date to December 2020. “The government should completely withdraw 3pc additional sales tax under 12th Schedule of the Sales Tax Act, 1990 and withdraw the increase in additional customs duty, for imports under SRO 655 and SRO 656,” Shaikh demanded.
He also stressed that the government should immediately grant blocked refunds of sales tax and income tax and reduce income tax for salaried class by 25pc for TY 2019 to benefit them under these crisis situations. He added that as a major portion withholding tax on salaries is already paid, therefore, the balance for last quarter should be exempted and corporate tax should be reduced to 28pc.
Korangi Association of Trade and Industries (KATI) automotive Chairman Ghazanafar Ali Khan said that he had a meeting with Governor Sindh Imran Ismail on Tuesday in which he catered all the issues regarding opening of the automobile industry.
Khan shared that the governor Sindh has promised a good package for the automobile industry on the pattern of the construction industry. He added that he hoped that he (governor) would also allow convenient shift timings soon.
Car prices are just too high. First they need to bring it down by at least 30-40% then ask any stimulus package from Govt. If they keep the prices at these levels, they will get all the benefits whereas the Consumers will continue to suffer at the hands of these robbers.
Crocodile tears