Low Tariffs for Newcomers to Hurt Existing Carmakers

Karachi: One of the three Japanese carmakers in Pakistan has demanded of the government to maintain level playing field while inviting new entrants in the industry, saying that the change in tariffs to facilitate newcomers would be a serious setback for existing players.

"Reduction in tariff to attract new entrants in the country is not acceptable to all the existing players in the industry," said Raza Ansari, Director Marketing Division at Indus Motor Company. He was responding to questions during a media visit to car making plant.

Media reports were suggesting that the government was considering collecting mere five percent duties on import of cars and parts by the new car makers in first year of their arrival in the country and then gradually raise the rate of duties to match the rate the existing players were paying, he said.

"We have heard that the government was considering raising rate of import duties by five percent every year for newcomers till they match the rate that the old players pay," Ansari said

The existing carmakers pay 32.5 percent duty on the import of parts, which are not available in local markets or pay 50 percent otherwise.

While, duties for the import of brand new cars vary from 50 percent to 150 percent depending on the capacity of engine from 800cc to above 1800cc cars.

"The new entrants might not make cars in the country and may instead import and sell cars by taking full advantage of tariff relaxation to them."

There are given minimum rules and regulations in for carmakers in Pakistan. The new entrants should match all these rules, he demanded.

He continued that they welcome new entrants with open hearts and minds.

This will be good for car users and equally good for the country, as they would bring foreign investment along with them.

But undue favour to them is not acceptable to us, as this will ruin the industry, endanger thousands of jobs, and benefit the people with vested interest, he added.

He said that if government was keen to give incentives to attract new entrants then it could allow the duty-free import of machinery and equipments to them; provide them land and electricity on subsidized rates; and give them tax holidays instead of giving them relaxation in import tariffs.

The reduction in tariffs would also give a blow to the allied vendors industry as they pay duties up to 20 percent on the import of raw material.

Federal Minister for Industries & Production, Mir Hazar Khan Bijrani has, the other day, said that some carmakers from Korea and China were willing to setup their manufacturing plants in the country.

The government claims that the reason behind inviting new entrants is to create the atmosphere of competition in the industry and provide users with cheaper car.

Ansari, however, said that there was no room available to cut the price of cars as one should understand that carmakers have increased the price of cars by seven percent on an average since 2008 to date against depreciation of rupee by 22 percent against Japanese yen and eight percent against American dollar.

"I invite government to give us a formula to slash down our prices keeping in mind the depreciation of rupee and other factors."

He argued that the price of used imported cars has also raised manifold if compare with the price was available before 2008.