Auto Policy Incentives for New Market Entrants Being Blocked

To power up  the automobile industry of Pakistan for the foreseeable future, all eyes are on the unveiling of the new Auto Policy. The new Auto Policy envisions the entry of new car manufacturers with governmental support and incentives, so that consumers have more choices. To break the monopoly of existing market players, the new policy planned to introduce various incentives for old and new car makers in Pakistan. However, it looks like preferential incentives for new foreign firms might be blocked / challenged in order to preserve the status quo for the foreseeable future.

The Entry of New Automobile Makers In Danger?

According to various media reports, Volkswagen and Audi were looking to establish a solid presence in Pakistan. However, the dense network and influence of existing car assemblers has prevented the government from inviting foreign companies. The primary reason given here was because of the tax incentives been offered to new players.

In order to make existing companies more amenable to their requests, the Ministry of Industries and Production on Monday presented a revised automotive development policy for approval of the Economic Coordination Committee (ECC).

At the 11th hour, the Water and Power Minister Khawaja Asif, stopped the ECC from approving the summary. The Minister pointed out several reasons why the summary should not have been approved, with Board of Investment Chairman Miftah Ismail not being present at the meeting being one of them. Additionally, The Ministry of Industry’s summary was different from what had been agreed at the committee level, prompting Khawaja Asif to call off the decision.

It is definitely a sad state of affairs because it is the second time in the last seven months that the ECC could not reach a conclusion.

New Automotive Policy Languishing Since 2013

During October 2013, the ECC decided to form a committee in order to propose a new automobile policy. Unfortunately, existing companies are still dissatisfied despite the fact that they also had some of their demands and benefits addressed satisfactorily in the agreement.

Given below were the new elements that the committee decided to implement:

Deletion of Category C: Offering same tax benefits to existing players. It was also agreed that the definition of Category A that offers incentives to the new manufacturers should be slightly revised and be replaced with the words ‘new brand’ so that the existing companies do not get tax benefits.

Revision of Category A: It was also agreed that the definition of Category A that offers incentives to the new manufacturers should be slightly revised and be replaced with the words ‘new brand’ so that the existing companies do not get tax benefits. Due to

Due to additional delay in approving the new policy, existing assembling companies are going to receive additional benefits. According to BoI Chairman Miftah Ismail, he suggests positivity that the new policy is going to be approved this month and support foreign brands as well:

“We will make sure that the new policy is approved within this month, which will also offer a level playing field to the investors.”

However, it looks like German automakers will see this policy against their objectives since Volkswagen is eager to do business Pakistan, but without a leveled playing field, it looks like they will quickly pack their bags and look for a new region to set their sights at.

FBR has criticized the existing players for availing concessions for the longest period of time as well as questioned their technological advancements in producing vehicles. Naturally, in comparison, companies such as Volkswagen and Audi possess better resources, technology and expertise, and it is also possible that they will be able to shed light on the production of cars in a cost-effective and efficient manner, provided the policy also has the interests of new market entrants in mind too.

  • This shows the current government’s so-called commitment to make Pakistan an Asian Tiger, to improve local R&D and promote technological development. Pakistan has been stuck in an age of mediocrity, unimaginative and old-world practices for a long while now and it’ll remain stuck in it until these illiterate, short-sighted, corrupt rulers are ousted from power.

    • why did the legend Musharraf and Shortcut Aziz failed to do the same and instead open Japanese imports which hurts badly to the economy?

        • I didn’t name it but I guess people have some personal issues that if anyone making a right point and they start thinking of nawaz.

          • The question is very much valid since almost every one of your comments is either directly or indirectly in favor of PMLN or forces against PMLN even though presented facts clearly say otherwise.

            • There are some people including you who follow controlled media and their comments show their level of knowledge. I f something happen to them they simply blame the government(Not PMLN). I put the same question to them or my comments were based on reality which youthia type people didn’t knew or understand. If you tell them that something happen in 1950 and they start saying that Nawaz or current government is responsible for that.
              Similar is the case here, someone bashing government or PMLN for the said issue and they knew nothing about the issue and it’s history.
              Youthias have that quality in them, you speak something against them and they believe you are PMLN.
              Yes I support Politicians and political governments in Pakistan. I beleive that “Jiska kaam usi ko sanjhay”.

  • The Govt should allow any and all car manufacturers to come to Pakistan. The Govt should also normalize taxes on imported vehicles to be even with locally manufactured cars.

    Honda, Toyota and Suzuki need to face the competition otherwise they will keep looting and plundering Pakistani’s. They are bloody thieves, and many many Pakistanis have died because of car crashes in their pathetic and unsafe cars.

    Better yet, the govt should issue a show cause notice and fine 50% of all their profits for the past 10 years as compensation.

    • Looks easy from your commet but what if they roll back their investment which causes loss of billions of dollars and thousands of people become jobless

      • All the car manufacturers are listed on the stock market, they can not just roll back. Since many people own shares the company is not owned by a single entity. If they try rolling back the Govt can come up with a law and float all the shares being held by the company itself, and the people will by them, the one that buys the most becomes the next owner.

        • Nothing happens to these companies. They are existed here with local partners. For example toyota pakistan is actually a project of Indus motor company owned by a pakistani. Same case with Deewan motors if you remember the one who assembled Hyundai cars. Hyundai left and deewan finished.
          Honda Suzuki Nissan all are locally partnerships.

          • I want them roll back their investments so that more companies could come and start manufacturing cars here.

            • Plz read story of Deewan Motors, leaving unemployment and bank defaults of billions.

  • VW is not coming to pakistan after emission issue they reported billion of losses in their income statements. They can’t invest anywhere now. However Nissan Gandhara Motors, Fiat, FAW and one chinese zoty or something shows their interest.

    • You don’t know how much huge VW is. This brands owns several others popular car brands. So a temporary loss has no worth for them.

  • This is plain old thuggery by NaPak Suzuki and Co. Government should not be held hostage to or bow down to these assemblers who have held the industry hostage for 30+ years without bringing an iota of technical advancement.

    • It’s not as easy.
      Government trying to resolve this issue from past 14 years.

      • No they are not resolving this issue from the past 14 years. They are only filling their pockets with commissions. If they were sincere, this matter wouldn’t have taken as long as you claim it is taking.

  • Basically its not just the existing car assemblers,
    its also there local partners that provide parts etc.

    These local peoples are not less than gangsters,
    they have strong hold within assemblers,
    for example, they provide sub standard parts to assemblers,
    if any new person try to provide better quality parts to assemblers at same price,
    his better parts get rejected in favor of inferiors quality ones.

    So unless this monopolistic nexuses is broken no thing will change.
    For example you will have new entrant like FAW V2 but it will still have cheap local parts as interiors etc

    These gangsters disguised as local parts manufactures only oppose new entrants
    because they’ll have to infest more to build cheap parts for new brands instead they are happy with status co. They bribe Govt. and Bureaucrats to either keep new brands out or force them to just buy there cheap parts.

    The phony excuses they provide that people will get jobless are a joke.
    As long as there is demand for cars there will be need for some one to make and maintain them. It like early era of cellular providers that use to say that PTCL/Paktel and its partners will lose jobs if new entrants allowed, yes they for sure will because its not the jobs its the business they’ll lose to new entrants and those jobs will be then be provided by new entrants.

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