The Competition Commission of Pakistan (CCP) believes that the auto industry in Pakistan lacks competition, and has a number of different issues that need to be addressed.
In a letter to the government, the competition watchdog expressed its concerns over the adverse factors that have been affecting the country’s auto market, as well as its economic position.
A local media report says that the letter has been sent to all relevant regulatory bodies, including the Ministry of Finance, the Federal Board of Revenue (FBR), and the Ministry of Commerce as well.
[Automobile industry] is essentially marred by a lack of competition. Complaints of quality, availability and pricing of passenger cars particularly, is characteristic of an uncompetitive market,
Premium Payments, On-Money, & Double Tax
Another extract from the 32-page report talks about a usual, but unfair practice, where customers have to bear additional costs if their booked vehicle’s price abruptly increases.
A number of such cases have surfaced in the past. Cars take months to deliver to their owner, and even now, car companies take additional payment from their customers if the price suddenly changes during the delivery phase of a booking.
Customers are required to pay more even if the prices change due to external, uncontrollable factors, like rupee devaluation.
Nevertheless, once customers book a vehicle, whether through partial or full payment, they have a reasonable expectation that any future price increase would not be applied to them, particularly when they have to wait several months to get delivery of their vehicles for no fault of their own,
Moreover, the CCP also recommended that the government should remove the double tax on vehicles, so as to allow a supply-push market. According to the committee, the reason behind late deliveries, that give rise to illicit own-money schemes, is that auto companies are not able to supply enough units to cover the country’s demand for vehicles.
To Prevent Production of Outdated Vehicles
An interesting bit in the letter reads that the government should discourage assemblers that import CKD’s of older, outdated vehicles – much like Mehran – by charging more taxes. Suzuki Mehran is a great example, it is a globally obsolete car that will stay in production till 2019 only in Pakistan.
As per the letter, the government has been urged to charge more tariffs on companies for importing CKD’s older than two years.
At the end, the CCP wrote that the competition will improve if more car companies enter the market. The respective authorities have been requested to add more incentives for new entrants, by sticking to effective auto policies.