KARACHI: The auto industry is reeling from a surge in imported used vehicles, following the government’s removal of protective taxes, which has led to skyrocketing old car imports and intensified competition for domestic manufacturers already struggling with reduced output and sales, an industry official said on Monday.
“The SROs 1571/22 and 1572/22 are no more; as such, the regulatory duty (RD) and additional customs duty (ACD) that were levied on used vehicles have come to be free of that tax burden, placing locally produced vehicles at a competitively disadvantageous position for which revised higher taxation has not been reverted," Abdul Waheed Khan, director general of the Pakistan Automotive Manufacturers Association (PAMA), said.
"Furthermore, the SRO 577/2005 prescribing duties and taxes on used vehicles was last amended about ten years ago, in 2014 and 2015, to the extent of items at serial nos. 3 to 6 of the said SRO, which consequently resulted in lower duties calculation and further aggravated the situation when 60 percent depreciation of duties and taxes is applied."
Khan said the government policy always stands against the import of used vehicles in the country. "It is the circumvention of the policy, with impunity, that has seen the entitlement of overseas Pakistanis illegally purchased by traders for bulk import of used vehicles," he added.
"The SUVs, a popular albeit expensive preference among Pakistani consumers, witnessed a sharp rise with 5,139 units imported during recent months, which came to be nearly eight times higher than the previous year’s figures, when 669 units were imported during the same period."
Additionally, the vehicles falling under the eco-pickup and minivan category saw a substantial increase too, with 5,099 units imported, compared to just 1,025 units in the same period last year.
Furthermore, during the current financial year, the import of used vehicles has witnessed an alarming spike, with 25,098 units making their way into the country — a staggering 641 percent increase compared to the previous year's figures, which were only 3,386 units.
"This staggering increase of 641 percent just in a period of one year underscores the magnitude of the challenge faced by policymakers and industry stakeholders alike," Khan said.
He further mentioned that in the month of February 2024 alone, a particularly concerning milestone was marked, with 3,213 used vehicles imported - a stark contrast to the mere 396 units imported during the same period in 2023.
"Local automotive manufacturers, who have been investing heavily in capacity enhancement and the development of local vendor industries, now find themselves at a significant disadvantage."
The unfair competition posed by the abundance of imported used cars not only undermines their efforts but also threatens the livelihoods of countless workers employed directly and indirectly in this sector.
"As mentioned, for the used vehicles, all the arrangements for import made locally by the traders, including the procurement of foreign exchange. Furthermore, the traders mostly stay out of the tax net; therefore, besides the loss of foreign exchange, local taxes are hardly collected from these traders.
On the contrary, the auto industry brings foreign investment, technology transfer, job creation, and huge revenue to the exchequer and is regarded as part of large-scale manufacturing contributing to the economic growth of the country." “Therefore, to sustain the growth of the local industry and to achieve the milestones of AIDEP 2021-2026, the government must ensure predictability and policy certainty,” he said.