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Government likely to allow 10 years old cars import, abolish duty
July 08, 2011
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The government of Pakistan is expected to allow, in principle, import of 10 years old cars and abolish 50 percent regulatory duty imposed on the 1800cc vehicles. The decision will result in substantial prices reduction of cars in the country.
Taking full advantage of current political situation of the country and incumbent government’s lack of interest in public affairs the local car assemblers have been increasing prices of products in clear violation of government’s instructions.
The decision to allow older car imports is expected to cool down increasing prices of cars being assembled in Pakistan to a reasonable level. The mighty auto assemblers have increased prices irrationally to exceptionally high levels, beyond the affordability of average consumer. Despite public demands from all quarters the prices of cars were not reduced.
The monopolistic behavior of car assemblers and restriction on the import of used cars had deprived local consumers of their right to have cheap sources of transportation. Recently government had allowed import of 5 years old cars to pave the way for healthy competition in the country and forced the assemblers to reduce prices but they did not heed, resultant the prices were increased.
Despite around 25 years in operation the local assemblers have failed to introduce high-tech production in the country and still relying on the import of complicated parts. They were supposed to achieve localization in the industry by making or purchasing parts from the local market under deletion program but failed to achieve. The assemblers still buying vehicles in Complete Knock Down CKD form from at least six countries even from India via Dubai.
Pakistan auto cartel never missed a chance to increased prices the latest price hike was due to the Japan's earthquake. Local car assemblers also took the advantage of Japan’s situation as the country was hard hit by the devastating earthquake and industry was worst affected. Japan’s all major industries were out of production due to damages caused by the earthquake and Tsunami. Earlier the assembler have announced to restrict production due to the imports of parts from Japan but experts believed that the production was restricted only to justify the price hike.
The quality of cars being assembled in the country is also questionable that is why consumers prefer used cars imported mostly from Japan. Cars from Japan are subjected to strict emission tests and quality control which are the main factors that encourage the sales of used cars in Japan than any other country. Japanese used cars are exported in a very high rate to more than 85 countries.
The public time and again demanded of the government to allow the import of cars trucks and buses used for more than ten years so that prices could be reduced and monopoly of local automobile assemblers be eliminated.
The import of used cars also contributes heavily to the national exchequer. According to the Auto Dealers’ Association of Pakistan the use car imports are contributing around Rs 20 billion to the national exchequer on account of import duty. The amount would be doubled if 10 years old cars are allowed to be imported.
So far auto assemblers enjoyed unprecedented patronage and made hefty profits. The government is responsible to create level playing field for all stakeholders in the country and check malpractices in the economy that no one should be allowed to make undue advantage in any situation. The prices of cars in all other countries are much lower and their quality is much higher than those being assembled in this country.
The government liberalized used car import to force the assemblers to reduce the prices to the justified level but it seems that they are inclined to challenge government’s writ. The governments is custodian of public interests but it protects the interest of those who are making undue profits. It is the right time for government to issue notification without further delay allowing import of used cars. Besides, government must also encourage new players to invest in auto manufacturing in the country for healthy competition and economic growth.
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