ISLAMABAD: Auto Industry Calls for Protection Against Used Car Influx
Pakistan’s auto industry is facing a significant challenge from the influx of used cars, prompting them to urge the government for stricter import restrictions in the upcoming budget for fiscal year 2024-25. Industry officials claim that during the first eight months of 2023-24 (July-February), used car imports caused a loss of over Rs45 billion to the local industry (Industry), impacting the economy (Economy) and jeopardizing millions of jobs (Jobs).
A Flawed Policy with unintended consequences:
The initial intent behind allowing used car imports was to facilitate overseas Pakistanis. However, this policy has been exploited through corrupt practices. Vehicles are being imported under the names of expatriates but then sold for profit within the country, undercutting the market for domestically manufactured cars (Industry).
Threat to a Thriving Industry:
Pakistan boasts a well-established automotive sector with 13 leading players involved in assembling and manufacturing vehicles (Industry). These companies, along with their extensive vendor networks, directly support over 2.5 million jobs (Jobs), with the wider industry contributing to nearly 5 million employments. This sector holds significant importance for the national economy (Economy).
Pakistan’s position within the global automotive landscape is noteworthy. The country ranks 34th among 49 passenger car manufacturing nations and is one of only 16 countries that produce a complete range of vehicles, including passenger cars, light commercial vehicles, trucks, buses, and tractors. This demonstrates a robust and diverse domestic auto industry (Industry).
Challenges and Burdens:
Despite these achievements, the industry faces numerous challenges. A significant burden comes from the high taxes and duties imposed on locally manufactured automobiles (Industry). Industry officials claim that retail prices often include over 100% of the actual cost due to these levies, making domestic cars less competitive compared to used imports (Policy).
The auto industry suffered a massive setback in 2022-23 due to import restrictions, skyrocketing inflation, and other macroeconomic challenges. photo: file
A Call for Support and Fair Treatment:
The auto industry is urging the government to take decisive action. They plead for a policy shift, either by stopping or significantly discouraging used car imports (Policy). This, they believe, would create a more level playing field and allow the domestic industry to flourish (Industry). Additionally, they advocate for a review of existing industrial policies to ensure a more supportive and unbiased environment for local car manufacturers (Policy).
Concerns Regarding Unfair Practices:
Industry players suspect that importers of used cars may be utilizing “grey channels” for their transactions, further undermining the local market (Industry). With over 60% of car parts already being produced domestically (Industry), the influx of used vehicles leads to underutilized production facilities and potential job losses (Jobs). This situation discourages further investment and growth within the domestic sector (Industry).
Investment and Innovation at Stake:
Developing a new car model requires a significant investment of time and resources. The process typically involves four years of research, development, testing, quality control, and substantial financial backing (Industry). The industry fears that the easy availability of used cars will jeopardize these investments and stifle innovation in the domestic market (Industry).
A Call to Action:
Pakistan’s auto industry boasts an investment of over $2.5 billion and has the capacity to produce 500,000 units annually (Industry). However, due to the current challenges, production has fallen to around 100,000 units in the present fiscal year (Industry). This decline has a domino effect on the entire industry and associated employment opportunities (Jobs).
The upcoming budget presents a critical opportunity for the government to address the concerns of the auto industry (Policy). By implementing stricter regulations on used car imports and providing a more supportive policy framework (Policy), the government can safeguard a vital sector of the economy (Economy), protect jobs (Jobs), and ensure continued growth and innovation in Pakistan’s automotive industry (Industry).
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