Local automakers under the umbrella of Pakistan Automotive Manufacturers Association (PAMA) and auto parts manufacturers under Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), had a crucial meeting on Friday to discuss the alarming decline in vehicle sales in the country.
According to sources, PAMA and PAAPAM will demand government to immediately withdraw the newly introduced Advance Custom Duty (ACD) and Federal Excise Duty (FED) to provide some relief to the automobile sector.
The meeting between the two key associations has come in the wake of the important meeting held between top business leaders and Chief of Army Staff on Wednesday, in which the army and government representatives had committed to address concerns of the business community.
Since the beginning of this fiscal year, automobile sales in Pakistan have declined to a frightening -42% according to data released by PAMA. This is mainly attributed to rising car prices that have went past the reach of masses, primarily due to Rupee depreciation, reduction in car financing, added duties & taxes and higher input cost.
Sparing the Alto 660cc, all the locally assembled vehicles are witnessing a sharp decline in sales. Honda Atlas and Indus Motors (Toyota) are already observing plant shutdowns for half a month rendering -68.5% and -58% reduction in sales. Pak Suzuki is suffering from -22.3% decline courtesy newly launched Alto, sparing which the company is also witnessing -68% reduction in sales.
According to an official:
“The consequences of this situation would be holding back of expansion plans by the manufacturers, increase in import bill, loss of employment, negative impact on the localization process in the country, negative growth and expansion etc. This crisis has made the auto manufacturers completely reverse their development plans and all the hopes of local manufacturers, new entrants, and the customers are dashed.”
The Auto Policy 2016-21 predicted the sales of 350,000 passenger cars and 79,000 light commercial vehicles by 2021. According to sources, the industry was set to achieve 500K mark by year 2023. However, the current drop in overall economic activity will result in achieving just 70% of sales target this year.
This situation is very disappointing for new entrants as well, and they are not going to reap what they expected at the time of their investments. Newcomers including Renault and Datsun are already reviewing their plans to carry on with their projects in the country.
The current scenario is not profitable for the government as well since they would face tax collection shortage of Rs.2 billion per month as a single car’s prices has nearly 40% of taxes that go to the government.