Budget FY25: IMC demands govt support local auto industry

ISLAMABAD: Chief Executive Indus Motor Company (IMC) Ali Asghar Jamali has said that the local auto industry is in the hope of remedial measures from the current government in the upcoming budget to support the local auto industry and to restore investors’ confidence.

Jamali, who held meetings with the finance minister, industries minister and the chairman Federal Board of Revenue (FBR), said local auto industry has requested for an increase in duties and taxes on used cars in the upcoming budget from the government, to benefit the local auto industry from the slightly improved economic activity, stable currency and a likely cut in interest rates.

“Contradictory to our expectations of improvement in demand from January 2024 onwards, this year could not turn a new leaf for Pakistan’s auto industry due to heavy import of used cars,” he added.

Local automakers witnessed a slight improvement of about 28 per cent in their sales in February 2024 against last year same period (7,953 in Feb ‘24 vs 3,642 in Feb ‘23). However, on the other hand, the imports of used cars recorded over 711 per cent (3,213 against 396 units) increase in February alone, against the same period last year.

“If this situation persists, our vendors’ industry will be forced to close down their businesses due to this unsustainable business environment, with plant-utilisation capacity levels between 25 to 30 per cent for the past few months,” he continued.

While, on the other hand, huge investments by vendors in order to meet surging demands of the auto industry, are now lying idle and only producing parts for vehicles at approximately 100,000 levels,” he said while talking to journalists.

Chairman PAAPAM has recently mentioned that overall; the local auto industry has invested about $2.5bn and contributed about Rs400bn in taxes in FY2022 alone, while it creates about 2.5 million direct and indirect jobs within the country, which continues to nullify the potential and magnitude of the industry.

The import of 3,068 used cars per month on average (taken from July 2023 to April 2024 imports) has been rendering local businesses ineffective, which will result in unemployment and economic loss (in terms of taxes). Also, illegal financial channels continue to be used for foreign payments related to the used cars. While, on the other hand, the local auto industry uses all legal means for bringing parts into the country, which continues to present a huge challenge.

Similarly, the government should ensure sufficient mechanisms are in place, in which used vehicles are only allowed to be imported within the country for overseas Pakistani family’s usage. He added that the imports also hurt the country’s reserves and depreciates the value of Rupee, along with threatening future investments due to the economic uncertainty.

He further stated that Toyota’s newly launched hybrid electric vehicle - Toyota Corolla Cross’ first quarter performance has been satisfactory. Toyota Corolla Cross has the highest percentage of localised parts in this category, which is over 50 peer cent. He added that as many as 13 brands are cumulatively producing 40 plus models locally, with a combined capacity to produce 500,000 units annually, but imported used cars continue to create sustainability challenges for the local auto industry.

“We have requested the to rationalise import taxes on used car imports to support domestic industry and to curb the influx of imported vehicles to revitalise the local market and safeguard the interests of local manufacturers and ensure the sustainability of countless jobs,” he continued.

In reply to a question, he said that if local industry’s proposals are made part of the budget, it will increase Rs80 billion of the FBR’s revenue. Answering to another question, he said that Toyota will export some vehicles to Africa from July 2024, urging the government to sign FTAs with African countries to that export of cars be expedited.

Copyright Business Recorder, 2024