Auto industry eyes production of 0.5 million units in five years

KARACHI: Pakistan’s auto sector is eyeing production of 0.5 million cars per annum in the next five years from the current 250,000 units.

Briefing the media at an auto workshop on Monday, Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Former Chairman Aamir Allawala said the potential investment of $46 billion through China-Pakistan Economic Corridor (CPEC) was a big opportunity for the auto sector. “The positive impact analysis of CPEC shows growth in infrastructure development, economic stimulation, enhancement in consumer buying power, and growth in demand for automobiles,” Allawala said.

He said Pakistan has the 6th largest population on the planet and 50 percent of the total population is below 30 years in age. “There are 90 million young potential consumers,” he said.

He cited the example of the surge in the motorcycle industry over 10 years. “There is 22 times growth from 87,000 units in 1999 to 2,100,000 units in 2015-16 in the motorcycle industry,” the former Paapam chairmen added.

“Pakistan is among the 40 automobile producing countries and 4 of the top 10 global car makers have plants in Pakistan,” he said, adding the auto sector was the top contributor to the government in terms of taxes as 34 percent of a vehicle’s price was paid as taxes.

The number of auto parts manufacturers (APMs) is 2,000 in the country and quantum of local parts usage is up to 70 percent of total parts, which are certified by Japanese standards.

During phase one, from 1991 to 2015, total market size (including imports) were 70,000, and in the second phase (2001-2007) the size went up to 250,000 units.

In phase three (2008 to 2013) the market size shrunk to a bit over 200,000 units, and in phase four (2014 to 2015) the market size once again went up to register over 280,000 units.

Allawala pointed out that the biggest dent to industry was the influx of imported used cars. Pakistan is among the few automobile makers in the world, but unfortunately the only one which allows import of used cars.

Despite being the reason of discouragement for new players and investment in the auto sector, import of used cars has resulted in the loss of 143,000 skilled jobs in Pakistan. In 2015, only used car imports stood at 45,013 vehicles, inflicting a loss of Rs67 billion to the national exchequer.

He said a new job in the APM (Auto Parts Manufacturers) plants was created or lost with a revenue change of approx Rs150,000, hence the import of used cars has resulted in the loss of 143,000 skilled jobs in Pakistan.

“Open circumvention of gift, baggage and transfer of residence schemes in the import of used cars resulted in the sales revenue loss of Rs21.4 billion for the local APMs in 2015,” he added. 

The ex-chairman of Paapam commended the Engineering Development Board’s initiative in the auto policy which clearly states that used cars were being illegally imported in the country by abusing gift and personal baggage schemes. The policy asks Ministry of Commerce and the Federal Board of Revenue to check malpractices in this regard and take corrective measures.

Speaking of the black economy, he added that in 2015, Rs67 billion was exchanged in the black economy through the Hawala channel. “Also, fixed duties under SRO-577 are suppressed by 30 percent and sale activity is being done in cash or through be-nami accounts,” said the former chairman of Paapam.

He said import of used cars was prohibited under the Import Policy Order but unfortunately, de-facto, commercial import of used cars was being undertaken under the gift, baggage and transfer of residence scheme.