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LAHORE:
The import of used cars has seen a staggering surge of 684% in the first six months of the current fiscal year compared to the same period last year. Sources indicate that over 16,500 units of used cars were imported from July to December 2023, marking an exponential increase compared to the approximately 2,100 used cars imported in the fiscal year 2022-23.
This data reflects the preference for used imported cars among Pakistanis over locally assembled cars, as imported cars typically offer additional features not commonly found in locally assembled ones.
Breaking down the categories, there was a significant uptick in the import of economy and small low-segment cars, with almost 9,900 units brought in, along with commercial vehicles, SUVs, and vans, which saw nearly 6,600 units imported. Furthermore, luxury vehicle imports also saw a notable spike, among other categories.
Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), Chairman, Abdul Rehman Aizaz attributed this phenomenal increase in used car imports to the removal of regulatory duty in the federal budget for FY2023-24 on used cars of up to 1800cc.
He noted that while this move was intended to revitalise the automotive sector, it has proven detrimental to the local auto industry. This trend bears significant economic implications, particularly for local vendors, who are facing an estimated loss of a staggering Rs36 billion, pushing them towards closure of their businesses.
Read: FBR dismisses proposal for 18% sales tax on cars
He pointed out the irony that the elimination of the 100% regulatory duty only benefits importers and companies dealing in Completely Built Units (CBUs), without offering any relief to the struggling local industry, which already faces significant demand-supply challenges.
Moreover, Aizaz highlighted that the replacement of locally produced cars with imported used vehicles is resulting in substantial revenue losses for the government, as taxes and duties that would have been generated from locally produced cars are now being missed out on. He explained that under the previous policy, the government received a fixed amount of dollars in taxes regardless of the original market prices of cars, whereas now duties and taxes are based on ex-factory prices, resulting in potential revenue shortfalls.
The surge in used car imports presents both challenges and opportunities for the automotive sector and policymakers alike, necessitating a careful reassessment of policies to ensure sustainable growth and support for local industries.
“The perception is being built in the minds of local customers that imported cars are more reliable, both in terms of body strength and features,” said Nauman Ali, a Lahore-based imported car dealer. This perception is somewhat factual, he added.
He explained that there are many variants available in used cars, which are often costly but mostly fall within the customers’ spending power for cars, since the prices of locally manufactured cars are also at an all-time high.
“This creates healthy competition, which forces many local assemblers to add more features to their variants. We are now living in a rapidly developing technological world, where the customer is the ultimate power, and the fact is that local customers, especially those living in first-tier cities, are more inclined towards imported cars,” Ali added.
Published in The Express Tribune, March 14th, 2024.
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