First of all, the figures of Rs 90 billion advance payments are incorrect and the source's credentials are itself suspect. No one knows who these APDMA members are and what is their contribution to the economy? There are no official printed documents of sales available from each member.
Likewise, the capacity figures quoted in the report do not represent the official status from the PAMA, GoP, EDB and Ministry of Industries. The speculation on the future demand lacks any tangible data. The figures of annual demand of 250,000 units are also not supported by any credible official or unofficial source.
Similarly the delivery periods mentioned in the news report are totally incorrect. No manufacturer has delivery periods of 8-10 months; in fact delivery periods of some models are as short as 1 month. There is no truth in the contention that reduction in import duties of new and used cars has had no impact on the market.
According to import statistics already 7,000 new and used automobiles have been imported in the year 2004 and another 30,000 - 40,000 are expected to be imported during the balance of the current fiscal year. This rise in imports reflects the increasing profit margins in the automobile import business.
Already three manufactures have announced the introduction of imported vehicles. Dewan Motors has launched the Mitsubishi range of vehicles, Indus Motor has launched the Toyota Camry and Pak Suzuki has announced plans to introduce two new models Liana and Grand Vitara.
According to some reports, Honda Atlas is also planning to bring imported cars. This indicates a growing trend among CKD manufacturers to opt for CBU business over local manufacturing. If the trend continues there will be a substantial loss in the form of jobs, revenues to the government, technology transfer, GDP contribution and therefore result in a shift from manufacturing to trading. This is a question that our policy makers and Government decision makers have to consider.
The local auto vendors will also suffer. The situation is further aggravated by the fact that local manufacturing of cars is becoming less and less profitable with the reduction in duties of new and used car imports as the gap between duties of imported cars and CKD import has now come down to only 15 percent which is the lowest in the region when compared with India, and Thailand where import duties of new cars are 105 and 72 percent respectively along with a host of other taxes.
These countries also give protection to local manufacturing against used car imports by applying prohibitive high duties. The rising value of the Yen and US dollar, the appreciating steel prices, the high cost of utilities and other inputs have also added to the cost of local car manufacturing.
Even then cars manufactured in Pakistan are cheaper than India. For example, Suzuki Alto in Pakistan is sold for US $6,945 against US $7,330 in India. Similarly a Honda City is available for US $11,877 in Pakistan against US $14,671 in India and a Corolla is available for US $16,816 compared to US $21,367 in India.
It is in fact the illegal middlemen and importers of used cars who are reaping huge profits in this business through the evasion of taxes and high margins. That is why they are lobbying for further liberalisation of car imports policy.
Contrary to the government's expectations of a positive impact through duty reduction on the import of new and used cars, Pakistan has already begun to face the aftermath of the government's inconsistent policies. Now it is for the government to choose if it wants Pakistan to develop a strong industrial base and make cars locally to serve local demand or convert the Pakistani market into an international dumping ground for used and reconditioned vehicles.