As the government seems to be trying to end incentives/ subsidies under the pressure of the IMF, the local auto industry asks the government to maintain policy incentives announced in the Automotive Industry Development and Export Plan (AIDEP) 2021-26.
As per the auto industry sources, the industry has requested the government to uphold AIDEP policy incentives for small cars, Hybrid Electric Vehicles and Battery Electric Vehicles for the policy period from 2021-26.
It is worth adding here that the core objectives of AIDEP 2021-26 include promotion of new technology, competition in small segments, and export initiation.
The local auto industry believes that it is time for the industry to support policy initiatives amid the current economic challenges being faced by Pakistan.
The AIDEP 2021-26 also provides incentives for Hybrid Electric Vehicles (HEVs) and Battery Electric Vehicles (BEVs) to attract investment in new technology and this was the reason Toyota announced a $100 million investment in this regard. Other brands are also planning to invest in new technologies.
An auto industrialist, who did not want to be named, claims that certain quarters are objecting to the incentives for HEV/BEV in the policy though they have enjoyed the same benefits under the ADP 2016-21 for at least 7 years on different products. The government should ensure uniform application of various taxes across the auto industry and there should be no windfall gain/change in market share due to any quantitative control measures.
Policies need consistency and this was quite evident when the government held the policy incentives for 5 years in ADP 2016-21 international investors from Japan, Korea, Europe and China observed the consistency and invested in Pakistan.
It is pertinent to mention here that post mandatory deletion program three auto policies were announced. The core objective of 1st policy was to protect localization, as stakeholders were apprehensive of localization rollback due change in policy regime from mandatory localization to tariff base economic localization. The policy interventions made in 2006 did serve the purpose to safeguard the local investment.
However, the 2nd policy AIDP for the period from 2011-2016 did not achieve its objective of ‘increase competition’. In the same policy period, the SRO 499(I)/2013 provided CBU concession to HEV CBUs since 2013, which has continued till date.
Similarly, the 3rd policy ADP 2016-21 comparatively was successful to achieve its core objectives of increasing competition. However, the new investment is concentrated in the upper segment and SUV category only. It did not go well for lower segments.
Last year 2021, the government gave the 1st ever incentive for new technologies such as HEVs and BEVs. The CKD HEV incentive announced in 2021 in Pakistan, it was the time to mainly attract investment and technology upgrades in the local vehicle manufacturing.
