Local assembling: PAAPAM backs 2-year category-A incentives

Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has supported two-year category-A incentives to existing local assemblers to produce new models, saying that it will stimulate investment and new capacity creation by passenger car assemblers. The Association has put this demand before the Finance Minister, Senator Ishaq Dar at a time when the government is all set to review Auto Development Policy (ADP) 2016-21.
In a letter, the Association which represents 350 Auto Parts Manufacturing Companies (APCs) said that on April 7, 2016 it had lauded the announcement Of Auto Policy 2016-21). However, at the same time, the Association had expressed disappointment that incentives promised for auto parts manufacturers/vendors were removed in the final ADP.
Finance Minister has been informed that due to low volumes, localization of high-tech parts in the country is possible only if the government supports the industry with investment incentives (same as in Special Economic Zones). This was also committed to PAAPAM during Auto Policy consultations but omitted from the final auto policy document.
PAAPAM argues that ADP 2016-21 provided no encouragement or incentives to auto parts industry. It also argued that automobile cost can be reduced by localization of hi-tech parts (-35% of total parts). The Association has requested for SEZ status for setting up plants for parts not yet locally produced.
PAAPAM has proposed the following conditions to qualify for SEZ status under ADP: (i) Greenfield investment by global or domestic vendors; and (ii) parts for Engines, transmission, suspension, body etc that have never before been produced in Pakistan for any auto assembler to be eligible for SEZ status.
Commenting on the proposal to allow two-year Category-A incentives to existing assemblers of passenger cars on the condition of setting up Greenfield plants to produce new models, the Association has favoured the proposed 2-year incentive as it will stimulate big investments and new capacity creation by passenger car assemblers. According to the Association, this incentive will result in introduction of new models, reduction in delivery lead time and increase variety of choice. "Such measure will increase volumes of local car production and ultimately provide more opportunities for production of local parts by auto parts manufacturers," the Association added.