The cabinet has finally taken a good decision to allow the import of five-year-old cars. The lack of competition in the market, owing to its small size and absence of economies of scale, make the car assemblers make money at the cost of ordinary people by increasing prices whenever the Japanese yen rises or the rupee falls. Ideally, we should have a developed car industry but it can not develop in a country with a small market size. To put it in perspective, China produced more than 13 million cars in 2009, Japan almost eight million and the USA around six million, compared to a little over 100,000 in Pakistan.
It would be foolish to expect the car assemblers in Pakistan not to raise prices when the yen rises or the Rupee falls further, because most of the car components for assembly are imported from Japan. However, if the size of the car market increases, there would be greater need for spare parts and Pakistan can make good-quality car parts, which could also be exported. Later on, if the numbers of cars sold in the country passes a certain threshold; we can also make good-quality cars. Until then the focus should be on increasing the market size and bringing cars within the reach of the ordinary people.
Ahmad R Shahid