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coronavirus
Coronavirus
VERY HIGH
Source: covid.gov.pk
Pakistan Deaths
29,077
1224hr
Pakistan Cases
1,360,019
6,54024hr
Sindh
520,415
Punjab
460,335
Balochistan
33,855
Islamabad
115,939
KPK
183,865

The government economic authorities are looking for avenues to curb the import bill. The most talked-about area is that of car imports, and within it are the completely built units (CBUs). Yes, the number is growing lately. But it is nowhere out of proportion to the past few years’ imports, and the number is not too significant. Nonetheless, temporarily banning or having prohibitive duties on imported cars can give the right signal of belt-tightening.

Some facts: Cars imports (CKD and CBU) share in total imports stood at an average of 2.1 percent in FY17 and FY18 – two years of the previous Bull Run. The number stood at 2.4 percent in FY21 and is at 2.6 percent in 4MFY22. The share of car imports is growing but still, the toll is one-fortieth of total imports. And within this, CBU is even less. CBU’s share in car imports averaged at 38 percent in FY17 and FY18, and the toll was down to 19 percent in FY21, and the ratio is also at 19 percent for 4MFY22.

This implies the share of locally manufactured cars within total cars sales is increasing. It is intuitive as well. With a higher number of assemblers in the market, the reliance on imported cars is falling. And if the government bans imports of CBUs, the demand for locally assembled cars will increase. But an inherent competition for local cars will fall with imports being banned. Plus, the localization is low – especially in new and high-end cars, and a ban on imports would have a limited impact on curbing imports.

Some other facts on imported cars: In FY17 and FY18, on average $443 million per annum was spent on imported cars. The number was down to $255 million in FY21 and is standing at $124 million (annualized $372mn) in 4MFY22. Still, the number in 4MFY22 is shy of the peak in 2017-18. Car imports cannot be blamed for the current all-time high imports.

Another interesting fact is about the number of cars being imported. According to the Pakwheels.com compilation, 10,513 cars were imported in FY21 versus 7,424 in FY18. The imported car’s average price in FY18 was $61,422. And the average price is down to $24,256 in FY21. Well, this goes against the general perception that import bills are fueled by high imports of luxury cars. In fact, the luxury car imports were much more in FY18. Numbers don’t lie.

An industry insider informed BR Research that back in 2016-18, many luxury cars (such as Land Cruisers) were imported by some embassies under concessionary duty structure. The number was much more than the needs of their staff. Technically, these cars could not be sold in a certain time period (say 3-4 years). But these were being sold in an advance agreement.

The numbers suggest that this phenomenon is less now. This means that there are less luxurious cars being imported now. Out of over 10,000 cars being imported in FY21, around 30-40 percents are MG HS and another 10-20 percent would be CBU imports by other new local assemblers. Certainly, there are E-trons and Land Cruisers being imported, but the number is probably less than what was in the past.

The growing number in 4MFY22 of CBU imports at $124 million probably has a lion share of MG HS. There are around 9,000 MG HS being imported and out of that, around 60 percent are in the current fiscal year. But these are based on last year’s demand. The company wanted to deliver earlier. However, due to supply chain disruption, the deliveries are being delayed. There is a backlog of other 2,000 MG cars which are being booked (or planned) that are yet to be imported. The fresh demand for MG is now low. Same is the case with other new entrants that are importing to serve the demand generated last year.

Also, EV E-trons are not being imported in thousands as perceived by many. The company is supplying 40-50 cars a month and at this pace, the number for the full year would be around 500-600. The real growth in car import is coming from CKD. The CKD car imports in FY21 were $1.1 billion (2% of imports) as compared to $809 million (1.3% of imports) in FY18. The number is up to 2.1 percent in 4MFY22. But there is actually a conscious effort are to grow the imports of CKD cars. The government wants to develop core engineering in the country by aiming to increase the number of cars produced in Pakistan to 500,000 – more than double the current levels. This cannot be done by imposing higher duties. And hence, there is not much gain from banning CBU units.

The bottom line is that it is fashionable to talk about banning car imports, but the dent on the import bill would be a small one – like one hit by a motorbike on an expensive car on a congested road!

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6 Comment(s)
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Ikram Nov 29, 2021 11:39am
A very well written piece. The issue is supply side economics that nobody is talking seriously.
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Sheikh Aleem Mohyud Din Nov 29, 2021 08:43pm
I have lot of suggestions which can benefit Pakistan and 220 Million Pakistani people but regret to say that nothing will change I sent Imran Khan Billions of monthly corruption three years elapsed did nothing instead grant awards to King's of money laundering and Extension to friends and posting again in irrelevant departments already drawing huge pensions
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rana altaf Nov 30, 2021 01:41am
Imported consumerism
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Maqbool Hussain Nov 30, 2021 12:47pm
@Sheikh Aleem Mohyud Din, nothing will change as they are all same mentality at the end
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Iqbal Nov 30, 2021 07:04pm
One thing will change. Overseas Pakistanis will not send home remittances.
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Atif Khan Dec 01, 2021 01:58pm
It's not only cars which are imported but grocery items such as shampoo, soaps etc. Although we are the agricultural country but sadly basic necessities are imported such as wheat, sugar etc. Localisation is not anywhere of the sight of this present PTI led government. It's the supporter of capitalism. Micro economics is out of question for them
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