Will consumer have a choice for cheap cars?
February 25, 2011
The government’s decision of allowing import of used cars does not seem providing revenue to the country and neither it gives choice to the consumers to buy a cheap cars—a loss-loss approach as arrival of recent imported cars do not show any major difference in prices between locally-made and imported reconditioned cars.
The government’s decision of allowing import of used cars does not seem providing revenue to the country and neither it gives choice to the consumers to buy a cheap cars—a loss-loss approach as arrival of recent imported cars do not show any major difference in prices between locally-made and imported reconditioned cars. A random survey to the used cars showrooms ( now mostly full of imported cars) revealed that the price difference in most popular 650cc-1300cc cars in imported and locally-made cars is not more than Rs 50,000 though imported one is five-year old car
A random survey to the used cars showrooms ( now mostly full of imported cars) revealed that the price difference in most popular 650cc-1300cc cars in imported and locally-made cars is not more than Rs 50,000 though imported one is five-year old car.
It is learnt that in imported cars category of 650cc cars include Esse and Meera by Toyota, Alto, Avery and Vegnar by Suzuki and Life by Honda and many others are available in the range between Rs 550,000-Rs 600,000. The prices of new models of 800cc locally made cars are less than imported cars as the most popular Mehran VXR CNG by Suzuki costs Rs 560,000 in the local market. The 800cc Ravi (pick up) costs Rs 488,000.
Similarly, imported cars like 990cc models Vitz having cost Rs 850,000-Rs 900,000, Belta available at Rs 950,000-Rs 1,050,000 and Passo cost is Rs 750,000. As against these imported cars locally made 1000cc Alto VXR CNG is available at Rs 720,000 and Cultus VXL price is Rs 906,000.
The 1290 cc imported car X Corolla by Toyota is available at Rs 1,250,000-Rs 1,350,000 as against locally made 1300cc Liana which is priced at Rs 1,239,000.
Local car dealers said that all previous records of used cars import seem to get broken this year as investors from various sectors are likely to put their investments of billions of rupees in the import of used vehicles as the import policy relaxation is luring them to earn millions of rupees of profit.
They said that since there are no rules of the game prescribed for eligibility of used cars imports and those prescribed are likely to be flouted in connivance of the officials, as the personal baggage could be claimed by the shipper himself. The practice however is totally different that makes the business attractive for the investors, they added.
As per claims from local auto dealers association the investors from different sectors are likely to invest in car imports due to relaxation by government, the claim came at a
time when dealers wanted to impress the government regarding investments as local auto makers have stopped expansions and further investments, not realizing that the claim actually goes against them as investment in used cars import means flouting of government policies.
Analysts in auto industry believe that the relaxation will not cause a normal business pattern but a huge shift of investment as many sectors currently are facing different kind of blockage due to geo-political scenario.
The current turmoil in business sector in Pakistan has detracted investors from almost every sector; be it property, tocks or any other business category.
The business of real estate in Pakistan witnessed a tremendous boom in 2005 but after that the business has been declining drastically during last three years. The prices of properties in developed areas has plunged by 10-20%, in developing areas by 30-40% and in new investment areas by more than 40%.
Moreover, Pakistanis who invested in Dubai Real Estate business have experienced a massive loss and withdrew their investments.
Remittances sent home by overseas Pakistanis, continuously show rising trend as $5,291.41 million was received in the first half of the current fiscal year 2010-11(July-December). The figures show an increase of $761.23 million, or 16.80%, when compared with $4,530.18 million received during the same period of last fiscal year.
The above figures mention that there is a heavy investment waiting and looking to be invested in a secure business where it can make profits. Investors may find investing in import of used cars as secure and profitable for themselves in the gloomy business conditions in Pakistan.
In 2005-2006 when imports of up to 5 years old used cars was relaxed, as many as 46,278 cars were imported to Pakistan and this time when heavy investment likely to assist the auto dealers, massive number of cars are expected to land in Pakistan.
Analysts say that the relaxation is meant not to benefit the low-end consumers at large scale but to the privileged class only who prefer to use luxury cars and ready to pay heavy duties. The previous statistics clearly reveal the tendency of buying of imported luxury cars outnumbering the sale of up to 1000 cc cars.
The relaxation will also negate the government’s policy to discourage the usage of luxury cars. Federal Board of Revenue (FBR) said that the government was warned that the decision would on one hand encourage illegal hundi system for purchase of the cars abroad and more dangerously the revenue collection at ports on imported vehicles will be through a highly unreliable process of customs which is already under question in several court cases.
According to the details the Ministry of Finance and FBR throughout the discussion since
early 2010 had been firmly against the proposal as the adverse impact of the implementation of this decision will be falling on their performance due to shortfall in revenue collection and forex depletion due to this decision as compared to pre December 2010 position where imports were not that much liberalized.
Government, however, ignored the FBR stance and reverted to its decision on Jan 27, 2011, allowing import of 5-year-old vehicles once again at the cost of massive reduction in its revenue collection as same collected from imported car will replace twice the collection from local models.
Similarly, it has put at risk the jobs more than 200,000 highly skilled engineering workforce, striving day and night to reach the target of 100 percent deletion or localization through 400 auto vending industries.
An auto part maker said that the government is not adhering to its policies consistently, frequent changes as far as import of used vehicles is concerned not only poses severe threats to the local Auto Industry and vendors but gesturing no friendly and conducive environment in Pakistan for the new entrants in the Auto sector as well.