RD abolishment on imported luxury vehicles may hurt local auto industry

KARACHI: The government’s decision to terminate regulatory duty (RD) on imported luxury vehicles will likely to snatch 25 percent market share from the local auto industry.

According to the letter written by the DG, Pakistan Automotive Manufacturers Association (PAMA) to the Federal Board of Revenue (FBR), the government’s decision to terminate RD on luxury vehicles has sparked concerns among local automakers, who were expressing fear of losing 25 percent of market share as the decision would increase the imports of vehicles exponentially by 3,000 vehicles per month or 36,000 units per annum.

“The government has created an impossible situation, that indirectly prevents the industry from progressing, while luxury items including CBU vehicles may continue to be imported at rather reduced taxes,” the letter said.

It informed the FBR that there is an intense situation of foreign exchange crunch in the country, so much so that trade and industrial sectors suffer tremendously due to the non-availability of imported goods and raw materials.

Furthermore, the PAMA said that the entire auto industry of the country is on the verge of a complete shutdown, evoking serious questions of revenue loss to the exchequer and social unrest due to the impending loss of thousands of jobs.

Public institutions regulating the industry support and endorse PAMA’s stance. However, delayed collective decisions by the government will deprive local parts manufacturers of supplying parts to the lost sale of locally manufactured goods.

The respective regulator and ministry will support PAMA’s stance to support local manufacturing, especially the part makers. For every imported vehicle, the financial loss to the local parts makers ranges from Rs 800,000/unit to Rs 1,500,000/unit, the PAMA said and added that the vendors are already suffering and are now on the verge of collapse due to shrinking volumes. They will not sustain another blow due to volume shifts from local manufacturing toward imported vehicles.

Meanwhile, the PAMA requested the government to retain the RD and must take immediate measures so that the local auto industry resumes its CKD operations.

Copyright Business Recorder, 2023