Saturday June 22, 2024

IMC proposes used car import curbs

By Our Correspondent
May 24, 2024
A representational image showing a large number of electric vehicles parked at a port. — AFP/File
A representational image showing a large number of electric vehicles parked at a port. — AFP/File

ISLAMABAD: The auto industry is urging the government to restrict used car imports to help revive sales and boost revenue, as the influx of second-hand vehicles hurts local businesses.

Indus Motor Company (IMC) CEO Ali Asghar Jamali proposed the curbs in a meeting with Finance Minister and Federal Board of Revenue (FBR) officials, saying it could increase revenue by up to Rs80 billion.

"I have met with the finance minister and FBR officials and proposed restrictions on the import of used cars that may result in increasing revenue from Rs70 billion to Rs80 billion," Jamali told journalists on Thursday.

He emphasized the urgent need for remedial measures from the current government in the upcoming budget to bolster the local auto industry and restore investor confidence. "This measure is essential to support the local auto industry, especially considering the slightly improved economic activity, stable currency, and the potential for a cut in interest rates," Jamali said. "Contrary to our expectations of improved demand from January 2024 onwards, this year has not seen a turnaround for Pakistan's auto industry due to the heavy import of used cars."

While local automakers experienced a modest 28 percent increase in sales in February 2024 compared to the same period last year (11,593 units in February 2024 vs. 9,011 in February 2023), imports of used cars surged by over 711 percent (3,213 units against 396 units) in February alone compared to the previous year. "If this trend persists, our vendors' industry will face closure due to the unsustainable business environment, with plant utilization capacity levels ranging between 25 to 30% for the past few months," Jamali added.

He further noted that the local auto industry has invested approximately $2.5 billion and contributed about Rs400 billion in taxes in FY2022 alone, while also creating approximately 2.5 million direct and indirect jobs within the country. The import of an average of 3,068 used cars per month from July 2023 to April 2024 has significantly impacted local businesses, leading to potential unemployment and economic losses in terms of taxes.

Jamali also highlighted the use of illegal financial channels for foreign payments related to used cars, contrasting it with the local auto industry's adherence to legal means for importing parts. He emphasized the need for the government to ensure that used vehicles are only imported for overseas Pakistani families' usage and urged the rationalization of import taxes on used car imports to support the domestic industry and revitalize the local market. In response to a query, Jamali estimated that incorporating the local industry's proposals into the budget could increase FBR revenue by Rs80 billion. Regarding exports, Jamali mentioned Toyota's plan to export vehicles to Africa starting July 2024, calling on the government to expedite the signing of Free Trade Agreements (FTAs) with African countries to facilitate car exports.