Govt orders probe into automotive firms’ failure in production

Tax on first resale of new vehicles introduced last week

ISLAMABAD: The federal cabinet has asked the Ministry of Industries and Production (MoIP) to probe the failure of automotive firms in increasing production capacity as they are unable to meet market demand, causing black marketing of locally produced vehicles and price hikes, Profit learnt on Wednesday.

The shortage of vehicles and increasing demand have caused black marketing, usually known as the business of premium or ‘on-money’.

According to sources who confided in Profit, the Cabinet, which met here on Tuesday, discussed the shortage of locally manufactured vehicles despite increasing demand. “Prime Minister (PM) Imran Khan has asked Minister of Industries Hammad Azhar to investigate the matter,” they informed.

They said that members of the Cabinet had shown concern over major auto companies including Honda, Toyota and Suzuki not enhancing the capacity of production despite running businesses in the country for 30 to 40 years.

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The Cabinet was informed that as per the auto policy, the Japanese companies had also failed to localise vehicles parts and were still importing the majority of parts from Japan.

However, a representative of an auto firm, while talking to this scribe, said that auto companies have long been suggesting the government to impose taxes on the resale of new vehicles for a given time period to discourage premiums. 

The representative further said that setting up manufacturing plants of various parts needs huge investment which could be made according to space in the market, keeping in view the long term policy. “Unfortunately, policies in the country keep changing which risk the major investment of investors.”

Interestingly, officials of the Engineering Development Board (EDB) were unaware of the Cabinet’s direction. Despite repeated attempts, secretary Industries did not attend the phone to comment on the issue.

Further, sources said that the demand for vehicles in the country has increased after the government’s decision to restrict the import of used vehicles through imposing strict conditions. “The restrictions on the import of used cars through the baggage system have almost halted imports.”

When contacted, Indus Motors Chief Executive Officer (CEO) Ali Asghar Jamali said that they were open to any investigation. “Though I am not aware of the development, I welcome any investigation as we hide nothing. The relevant ministry is aware of the investment and localisation by our company,” he said.

“I had requested the prime minister to introduce taxes on the resale of new vehicles within 90 days to discourage on-money. The government’s decision in this regard would hopefully address the issue of premium,” he added.

It may be noted here that the government introduced a tax on the first resale of new vehicles within 90 days last week.

As per sources, since automotive companies and the government will negotiate the new auto policy in January 2021, issues related to the rising prices of locally-assembled vehicles and illegal premiums would also be discussed.

The auto industry would be renegotiating the Auto Policy 2016-21, which expires on June 30, 2021.

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Ghulam Abbas
Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]

7 COMMENTS

  1. Government should ban bank loans for cars having more than 50% foreign parts. Strict action is needed to bring this mafia under control

      • At least better than Gadha Gadi?
        India exported over 4.6m vehicles worldwide and is world’s largest manufacturer of two wheelers and unlike Pak records neither of them manufacturer is fascists, fanatics, terrorists or in anyway support Pre/ post Nabi Arabian Cultural Jahillya. So, please keep in mind to search for Indian products for betterment of the ‘Land of Pure’ . 😅

  2. Hammad Azhar and Razak Dawood are front men for this assembler mafia in the government. They will never take drastic steps needed.

    Further, localization targets must be imposed in terms of percentage of car price. It will encourage localizing the most expensive parts preferentially instead of cheap screws, nuts and plastic parts.

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