Pakistan has few multinational auto manufacturers and assemblers such as world-renowned brands Suzuki, Toyota and Honda, but the approval by the ministry of finance to import reconditioned cars in the budget 2004-05 after about a decade has put a new life in the business of small car dealers.
The private sector importers had so far introduced more than new 90 models of small and new cars, including Hilux, four-wheelers, double cabin and others vehicles, which not only attracted big investors to this business but also a big number of customers who want to get a quality and strong car without paying a single penny of own money.
The listed companies, however, were not behind the private sector and have taken full advantage of the government’s approval to import new models of their company’s brand. Pak Suzuki Coomany, the leading auto manufacturer of Pakistan for the past 25 years because of its dynamic sale of Mehran 800cc and Cultus 1000cc and Margala, has imported Complete Build Unit (CBU) of Liana (1600cc Car), Jimny (Jeep 1300cc Five Door), Grand Vitra (EL-7) (2700cc Five Door Jeep), APV Van (1500cc).
Indus Motor has introduced popular brands of Toyota. During the past 16 months, the company has imported Camry 2400cc, Altis 1800cc, Land Cruiser, Parado, RAV and different models of Hilux pickup. Similarly, the Honda Atlas car has presented new models of Honda Accord cars, and Dewan Farooq group is importing Sonata, Coupe and Terraca.
The permission by the government on import of reconditioned cars could halt further investment by multinational auto companies in Pakistan.
According to a source, “over 80 percent investment plans of the listed companies have cooled down since July to till date.” Only 10 percent investment has been made in the auto business, and 10 percent is in the pipeline, the source claimed.
The automobile industry has chalked out a plan of Rs 80 billion investments in Pakistan’s auto industry, but the government’s decision for the enhancement of depreciation cost on used vehicles compelled the auto industry to review their policies.
The Benazir Bhutto government banned the import of reconditioned cars on January 24, 1994 to protect the local industry, especially Toyota and Honda, as both the companies had set up their plants in 1994-05. Since then, the dealers were unable to import used or reconditioned cars because of heavy customs duties. During the past 10 years (1994-2004) the demand for vehicles went up, but the companies did not expand their production in keeping with the rising demand.
“The demand and supply gap with regard to cars had touched 125,000-150,000 vehicles in 2004-05,” said a government official. “The authorized dealers of these companies were charging higher own-money on the booking of cars from a customer,” he added.
He said the federal government has taken this decision only to ease the demand and supply gap and this gap would be overcome in the next two or three years.
In the first five months of the current fiscal year, “the private car dealers had imported 9,600 used or reconditioned cars from Japan,” said H M Shahzad, chairman of the All Pakistan Motor Dealers Association (APMDA). Till Nov 26, almost 8,000 used or recondition cars have been imported, and another shipment of 1,600 vehicles is to be anchored on Nov 28, he added.
The finance division has collected a revenue of Rs 2.95 billion from this import of vehicles under the Gift, Transfer of Residence and Personal Baggage Schemes. This amount is up 400 percent in July-November 2005 period, dealers claimed.
Mr Shahzad said: “The revenue department is likely to collect around Rs 8 billion to Rs 10 billion in the current fiscal year. This revenue can further go up if the government allows private parties the direct import of used or reconditioned cars.” He said the dealers have to buy a gift paper, whose cost is Rs 1,00,000.
The private sector is importing around 700 models, but there is a huge demand for 90 to 100 models of different vehicles, he said.
“Customers demand Toyota Corolla, Toyota Primo, Toyota Aliens, Toyota Mark-II, Grand-D, Toyota Platz, Toyota Vitz, Daihatsu, Honda Accord CL-7, CL-9 Land Cruiser, Toyota Parado (2700-3400), Chevrolet, Toyota Double cabin Vigo, Toyota Hilex Pickup or Van and Mercedes E-200, C-200” a dealer said.
“The new models are being fetched from Japan after an huge investment by dealers,” Mr Shahzad said. “Customers do not have to wait to get a car after his full payment,” he added.
The local auto manufacturers and assemblers produced over 47,171 units of local brands in the country, up 26 percent compared with the last four months (July-October) of 2004.