Revival in demand and imports of brand-new cars, sports utility vehicles(SUVs), and pickups have pushed up the overall import bill of completelybuilt up (CBU) vehicles by 193.7 per cent to $94 million in the first halfof the current fiscal year (1HFY21) from $32m in the same period last year.
Overall imports of these vehicles in FY20 had witnessed a drop of 55pc to$99m owing to the government’s decision of imposing various new rules andregulations to curb used car imports in order to facilitate the sale oflocally assembled cars and encourage new entrants in the auto sector toachieve their sales targets in a market-friendly environment.
According to a report by *Dawn*, the government had allotted quotas to newentrants for bringing in brand-new CBU cars and other vehicles.
Demand for cars and SUVs surged after buyers returned to the market owingto a drop in interest rates. Along with improved economic indicators,another reason for the spike in auto demand is lifting of vehicles bygrowers of cash crops who fetched higher prices for the commodities and nowhave ample liquidity.
On the other hand, car assemblers said that they were facing severe supplychain issues due to congestion at foreign ports owing to the Covid-19pandemic.
An official of the Pak Suzuki Motor Company Limited (PSMCL) said it wascontinuously in touch with its suppliers and shipping lines to mitigatesupply-chain related interruptions.
Earlier in June 2020, Pakistan Automotive Manufacturers Association (PAMA)had expressed concerns regarding a relaxed import policy for used carsarguing that the move will damage the confidence of new investors and harmthe existing auto industry.
PAMA, which represents all major OEMs, had also earlier written a similarletter to Prime Minister (PM) Imran Khan.
The association had predicted that with more capacity being added with theentrance of Kia, Hyundai and Datsun, the supply from the local autoindustry would overtake local demand, rendering all imports unwanted,costly, and contrary to the interests of the country.
PAMA had alleged that used car dealers were abusing the policy meant foroverseas Pakistanis and illegally importing used cars and vehicles causinga massive flight of foreign exchange through illegal channels of hundi andhawala.
Imported used cars have a 30pc share of the market. As a result, chapterfive of the Automotive Development Policy (2016-2021) was devoted toregulating the import of used vehicles in the country.
It was in response to this policy that many new entrants respondedpositively and made huge investments in the country’s automotive sector.
Earlier, the government through the Ministry of Commerce had directed allthe importers to show remittance proof through a bank encashmentcertificate.
According to PAMA the misuse of the policy related to import of usedvehicles loss of foreign exchange of almost $2 billion every year, evasionof General Sales Tax (GST) and Value Added Tax (VAT) by importers, loss oftechnology transfer to the country.
In comparison, local manufacturing of cars leads to the development of thelocal industry that in turn creates jobs for the local population.
Source:link