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Import of used cars surge 67pc to 53,600 in 2015/16

By Shahid Shah
July 20, 2016

Spending of Rs75 billion

KARACHI: Pakistanis spent around Rs75 billion on the import of used cars in the last fiscal year of 2015/16 and the import surged 67 percent to 53,600 during the period, industry data showed on Tuesday.

The country imported 32,100 old cars in the fiscal 2014/15.

Mashood Ali Khan, senior vice chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) said this sale number is enough to enable investment of around $600 to $700 million in two plants of a size equivalent to Honda Atlas Cars Pakistan. These plants produce around 25,000 units in a year.

Khan said with a population of 200 million, 55 percent of which are below the age of 30 years, Pakistan needs to focus on the automobile industry to generate jobs for young workers, technicians, engineers and management professionals. “Import of used cars can never serve this objective,” he added.

The local industry leader said the auto sector employs almost three million people and can become an engine of growth as happened in other Asian countries, such as Japan, Korea, Thailand, Indonesia, Malaysia, India and China.

Chairman Adil Khan at Automotive Traders and Importers Association Karachi defended the import, saying importers also employ a large number of workers at their showrooms.

Khan said local manufacturers are not providing value for the money to the buyers, who therefore look for the imported cars. “If the import policy is further relaxed the citizens will buy more imported cars as they give true value for the money,” he added.

Until the Import Policy Order 2004, there were adequate safeguards to ensure that these schemes were not misused and the domestic industry was not damaged from the import. However, the Import Policy Order 2005 incorporated major changes. 

“With such order, floodgates were opened and domestic auto and auto parts manufacturing industry badly suffered in the last 10 years as four auto plants have been forced to shut down,” said Khan of Paapam.

In 2015-16, the auto industry returned to a production level of 216,000 vehicles, a level which was last witnessed in 2006-07. “In fact, if the special one-time production volume of 30,000 taxis is reduced, the quantity sold by domestic industry is even lower than 2006-07,” he said.  

Pakistan is only one out of 40 automobile producing countries of the world, in which de-facto commercial import of used vehicles is undertaken under the garb of schemes for overseas Pakistanis.

Khan said personal baggage, gift and transfer of residence schemes, which are meant to facilitate overseas Pakistanis in imports of used cars, have been grossly misused by dealers.

Import of used cars is the biggest impediment to bringing new investments in auto sector, either by new entrants, assemblers or auto part vendors. 

“Even after the auto development policy’s announcement, the foreign investors are undecided as to why they should make long-term investments worth hundreds of millions of dollars in a country, where they have to compete with over 50,000 used vehicles imported every year in blatant violation of the law,” said Khan, who recently visited European countries to find out investors and buyers of local auto parts.  

He said the industry stakeholders hesitate to make long-term investments because of used cars import, resulting in supply-side shortfall and longer delivery lead times.