All Pakistan Motors Dealer Association (APMDA) Chairman Haji Mohammad Shehzad highlighted the significant impact of removing regulatory duty on cars, especially on 1,800cc imported vehicles. The imposition of a regulatory duty in the past had resulted in increased vehicle prices, leading to a decline in sales and purchases.
However, the chairman expressed his optimism about the government's decision to remove the regulatory duty, foreseeing a substantial reduction in car prices in the upcoming months. This article explores the potential benefits of this decision, the consequences of expensive cars, and the need for Pakistan to focus on domestic vehicle manufacturing.
The Negative Impact of Regulatory Duty
The imposition of regulatory duty on cars had adverse effects on the automotive industry in Pakistan. With increased vehicle prices, potential buyers were deterred from making purchases, resulting in a significant decline in sales. This decline had a cascading effect on the industry, leading to financial losses worth billions of dollars.
For instance, Honda Atlas Cars Limited, which typically sold 50,000 vehicles annually, only managed to sell 10,000 vehicles in the year 2023. Such a drastic drop in sales highlighted the urgency to address the issue and find viable solutions.
Potential Reduction in Vehicle Prices
The decision to remove regulatory duty on cars brings hope for a significant reduction in vehicle prices. Although the possibility of an increase in the dollar rate may pose a challenge, the elimination of regulatory duty can offset this impact.
With reduced prices, more people will be able to afford cars, leading to increased sales and improved market conditions. The government's efforts to make vehicles more accessible to the general public will contribute to economic growth and enhance the quality of life for many individuals.
Advantages of Domestic Vehicle Manufacturing
APMDA Chairman Haji Mohammad Shehzad emphasized the importance of domestic vehicle manufacturing in Pakistan. By shifting the focus from importing vehicles to manufacturing them locally, the country can not only gain control over prices but also generate significant revenue.
Shehzad estimated that the government could collect approximately $1-1.5 billion annually through this initiative. Manufacturing vehicles within Pakistan would also create job opportunities, boost technological advancements, and stimulate the overall economy.
Unfulfilled MoU and the Need for Change
Pakistan has a Memorandum of Understanding (MoU) from the 1980s that aimed to introduce transport technology within five years and establish vehicle manufacturing capabilities within the country. However, this commitment remains unfulfilled to this day.
It is crucial for the government and relevant stakeholders to revisit and implement the provisions of the MoU. By doing so, Pakistan can achieve self-sufficiency in the automotive industry, reduce reliance on imports, and create a favorable environment for local manufacturing.
Import Restriction Policy and Its Implications
The APMDA chairman further suggested a revision of the import restriction policy regarding used vehicles. Extending the age restriction from three to five or seven years would positively impact the automotive industry.
This change would allow a wider range of used vehicles to enter the market, increasing consumer choices and potentially boosting sales. It is important to strike a balance between supporting the domestic industry and catering to the diverse needs of consumers.
Current Market Scenario and Price Surge
Data shared by the Pakistan Automotive Manufacturers Association revealed a concerning trend in the automotive market. In the first nine months of the current fiscal year, only 85,776 units were sold, representing a 50% decline compared to the same period in the previous fiscal year, during which 172,612 units were sold.
Car companies in Pakistan have attributed this decline to multiple factors, including the depreciation of the rupee. As a response, these companies have increased prices, exacerbating the affordability issue for potential buyers.
Furthermore, revising the import restriction policy to allow the import of used vehicles older than three years for five or seven years can have a positive impact on the automotive industry. It would broaden consumer choices and potentially boost sales, while still supporting the domestic manufacturing sector.
The current market scenario highlights the urgent need for intervention. With a significant decline in vehicle sales and car companies citing factors such as the rupee's depreciation, it is crucial to address the challenges and create an environment conducive to growth and affordability.
