This was decided at a recent meeting of officials of Ministry of Industries and Production and EDB with existing car assemblers. The meeting was presided over by Prime Minister's Advisor on Commerce, Textile, Industries and Production and Investment, Abdul Razak Dawood.
The meeting was convened in compliance with the decision of the Federal Cabinet on March 20, 2019 wherein it was decided that Law Minister. Minister Finance and Advisor to PM on Commerce & Industry will develop a regulatory framework including penal provisions, if required, within three weeks to check the illegal practice of charging premium by car dealers from genuine buyers over and above the invoice price of the vehicle; in doing so capacity and production standards of different car manufacturers and vehicle safety standards may be focused.
The Advisor to Prime Minister directed the participants that the ECC decision and matter of premium is a serious issue and CEOs of firms should attend such high profile meetings. The participants should have full authority to give any statement /commitment.
Abdul Razak Dawood read the ECC decision and told the participants that Ministers have signed and confirmed ECC decision to resolve the issue. He further stated that Cabinet has rejected the claim of OEMs that no such practice of charging premium exists in the market.
Maqsood-ur Rehman Rehmani, Vice President, Honda Atlas Cars Pakistan stated that sales of Honda cars declined due to filer condition imposed in budget 2018-19. He further added that situation was expected to improve as Finance Supplementary (Second Amendment) Act 2019, removed this restriction; however, 10% Federal Excise Duty (FED) on sale of vehicles above 1700 cc has resulted in drop in sales due to price increase especially in case of their most popular model Honda Civic. Honda claimed their sales due to FED has dropped by 60%. They do not have enough back orders and company is considering cutting down its production to single shift. He further added there is no late delivery in the case of their vehicles however it does happen in exceptional cases when customer want to buy a car of a specific color/model.
Representative of Indus Motor Company endorsed his point of view and added that FED has badly hurt the sales of their Fortuner SUV and Altis Grande vehicles.
Representative of Indus Motor Company stated that online vehicle availability system is in place for customers by their firm and most of their cars are available as early as in April and May, 2019. He further revealed that Indus Motor is educating the customers and cancelled booking/ dealership to curtail premium issues. He proposed that as mostly investors are involved in charging premium to customers therefore, resale of new vehicles may be restricted up to six months by imposing Rs. 100,000/- to 200,000 as Transfer Tax. The proposal of transfer tax was endorsed by all OEMs.
Shafiq Ahmed Sheikh, head public relations, Pak Suzuki Motor Company stated that their cars are not being delivered late. All of their vehicles are being delivered within two months' time period. He added that investors are involved in practice of charging premium and their dealers are not involved in this practice. He further proposed that government should provide legal cover to OEMs that if a dealer is found involved in such illegal practice then the dealer must be blacklisted and should not be allowed to do business in automobile industry at the same address/CNIC/or a relative's CNIC for any other OEM. The suggestion was endorsed by M/s Indus and M/s Honda representatives; and they added that although firms are registering one vehicle on one CNIC but fake companies may be misusing the rule and ordering multiple cars for their company.
DGM-Incharge (Policy) informed that MoI&P/EDB on their part expect that new entrants under ADP (2016-21), once in full production, will help to effectively ease out practices such as premium, delayed deliveries and quality. Further he added that in pursuance of objectives of ADP 2016-21, summary to adopt WP.29 Regulations is awaiting approval of cabinet. The adoption of WP 29 will help locally manufactured cars meet global standards.
Secretary, MoI&P while responding to the transfer tax proposal revealed that it is a provincial subject and it may have to go through CCI. He added that instead of a fixed amount a percentage may be charged.
Representative of Honda stated that they have paid Rs. 2 billion as Kibor +2% payment till date. All OEMs said that they are paying Kibor +2% payment in case of late delivery. Furthermore Secretary MoI&P asked the OEMs to provide a certificate/letter that they are not part of charging premium and shall take all necessary measures to discourage the premium practice by their own dealers which should satisfy the ECC; or else government has to take steps to penalize such practices.
After detailed discussion, it was decided that the federal government will initiate the legislation so that resale of new vehicles may be restricted to within six months by imposing transfer tax as percentage of price of vehicle. The matter will be discussed with FBR and will be taken to Council of Common Interest if required.
The government will provide legal cover to OEMs that if a dealer is found involved in illegal practices then his dealership will be blacklisted across the board and such dealership will not be allowed to do business in automobile industry on same address/CNIC/ or some relative CNIC for any other OEM.
It was also decided that such companies will be banned and pinned down by FBR by their tax profiles that are using their black money to buy cars and are promoting practice of premium.