Speaking at 5th Pakistan Automotive Industry Workshop held at Mingaora Swat, Jamali said new entrant could import CKD at 10 percent while local part makers import components at 10 percent and sub-assemblies at 20 percent - which made them uncompetitive for new entrants.
Moreover Ali Asghar Jamali said local auto part makers would have to compete with high economies of scale of global OEMs as well. Therefore, the government should remove this tariff anomaly by reducing components duty to 5 percent and sub-assemblies duty to 15 percent to 10 percent - which will reduce cost of locally produced parts and will enable part makers to produce parts for new entrants as well.
Talking about the impact of ADP 2016-2021, Jamali said IMC welcomed competition as it would give more choice to consumers who would eventually decide which brand offered best value for their money. "IMC intends to compete with new entrants though Toyota's QDR promise which is Quality, Durability and Reliability. We strongly believe that high localization level achieved by us is our biggest competitive advantage against all new entrants.
However, to support the local engineering base which is the true employment generator, the government should also consider incentives for auto part makers to make them more competitive to produce parts for new entrants as well," said CEO IMC.
Jamali said with every model change in Corolla, IMC has successfully localized more and more, despite significant advancements in parts sophistication, and resultantly achieve reduced dollarized cost of Corolla. "For example, the first Corolla cost more in USD terms with lower level of localization as compare to today's Corolla which is 64 percent localized and cost is significantly lower in USD terms, whereas there are numerous advancements comparatively such as dual air bags, Power Steering, ABS Brakes, Immobilizer, etc. The existing Corolla is NCAP 4 star compliant vehicle".
He said IMC increased its capacity by 20 percent and has invested around $126 million, without any incentives, for model introduction and improvement in production. Increase in production from 54,800 to 66,000 vehicles (with overtime 80,000 vehicles) has been witnessed after the capacity enhancement in financial year 2018.
CEO said the government has taken good steps to support auto industry such as lifting ban on non-filers, yet he added, the auto industry is facing many challenges which hampering industry from achieving its potential including the newly imposed 10 percent Federal Excise Duty that has been imposed on 1700 cc and above vehicles which includes our Grande and Fortuner, whose sales will suffer.
The contribution of the auto industry to GDP currently stands at over 2 percent, while the industry has direct employment of 300,000 and indirect employment of 2.5 million people.
"With investment coming from China, Saudi Arabia, United States, United Arab Emirates and bailout package from IMF, Pakistan auto market is likely to get a boost and cross 500,000 units mark before expected, provided the government continues to ensure consistent and long term policies. However, recent decision of imposing 10 percent FED creates uncertainty in the minds of investors as it disturbs their feasibility and affect planning volumes" said Aamir Allawala, CEO, Tecno Auto Glass Ltd.
"Incentives for local auto part makers coupled with consistency in policies can help the auto manufacturers and vendor to significantly enhance their contribution to the national economy and employment creation," Allawala said.
"Discrepancy in Custom Valuation Ruling 661 has become an opportunity for duty/tax evasion to unscrupulous importers that puts local auto industry at disadvantage," he added.
"We urge the government to look into these discrepancies which are not only hurting the local auto industry but also the government due to less collection of duties and taxes," he added.