ISLAMABAD: The government is considering penalising manufacturers of cars for discouraging minting of “Own Money” from customers as it intends to impose compulsory payment of KIBOR plus 3 percent interest if the vehicle is not delivered within 60 days. “The government intends to move ahead with compulsory payment of Karachi Interbank Offered Rate (KIBOR) plus 3 percent interest payment to customers by manufacturers who booked vehicles but not delivered within 60 days,” top official sources confirmed to The News here on Thursday.
The payment of around 10 to 12 percent markup (KIBOR plus 3 percent interest payment) in case of late delivery of cars is around the corner as the government is actively considering curbing this menace with an iron hand. The total size of the auto sector stands at around Rs940 billion on current market price with local value addition hovering around Rs300 billion.
The Engineering Development Board (EDB) has assessed that total capacity of the auto sector to manufacture cars, SUVs, motorcycles, auto rickshaw, trucks and busses stood at 4.088 million in Pakistan but their maximum production touched a figure of 3.141 million.
A big manufacturer possessed the capacity of making 71,000 cars but its maximum production stood at 56,684 and its current production was standing at just 49,664. Another has capacity of manufacturing 150,000 cars but its maximum production touched the mark of 123,846 and its current production stands at just 61,334 vehicles only. Another big brand possessed capacity to make 55,000 vehicles and its maximum production touched figure of 42,710, however, its current production stands at just 26,430 only. Yet another is having a capacity of making 25,000 vehicles and its maximum production touched figure of 12,000, however, its current production stands at 12,000. Another brand has the capacity to manufacture 15,000 vehicles out of which its maximum production stood at 500 vehicles only. Its current production stands at 500 vehicles at the moment.
The current production of manufacturers of cars/ SUVs stood at 2.783 million. This data clearly shows that the car manufacturers are not exhausting the possessed capacity, so it is paving the way for creating demand-supply gap in the market. Manufacturers’ total capacity in terms of number of cars and SUVs is standing at 418,500 and their maximum production remained at 250,740 but existing production is just 164,298.
There is a capacity of making 3.5 million motorcycles out of which the maximum production touched figure of 2.761 million but the current production stands at 2.5 million. There is capacity to manufacture 150,000 Auto Rickshaw and maximum production touched figure of 118, 450 but the current production was standing at 115,000.
Total capacity of making trucks and buses stood at 20,000 out of which the maximum production touched the figure of 10,436 and the current production stood at just 3,942. In the wake of a massive gap in demand and supply, this phenomenon of “On Money” has become a routine in the auto sector as after making full payment the customer will have to wait for six months at least for delivery of the vehicle. If he or she requires a vehicle on an immediate basis, then the only solution is payment of “On Money”. Although, the government took steps in the budget for registration of car on the name of the first buyer, so far, the On Money continues unabated. The On Money ranges from Rs100,000 to Rs700,000 depending on brands of different cars.
The tax payment of Rs50,000 to Rs200,000 where booking of vehicle is made by person A and registration is made in the name of person B, this intervention is claimed to have yielded some positive results.
It is also under consideration that the maximum upfront payment does not exceed 20pc of the invoice value at the time of booking. There is another condition under consideration that online booking by manufacturers or their authorised dealers to ensure transparency. To fill the demand/ supply gap in less than 850cc cars, the import duties have been significantly reduced and this step is yielding desired results.
