Lower Taxes Could Drive Growth in Car Demand in Pakistan: Kia Lucky CEO

Low taxes on cars could drive growth in the demand and production of cars and will reinvigorate the economic activities in various local industries. This was stated by Asif Rizvi, CEO KIA Lucky Motors Pakistan, earlier while presenting his analysis on Pakistan’s automobile industry.

He suggested that the government should reduce the taxes on cars to boost the demand and sales on a sustainable basis.

The producer of the car also pays taxes on the account of CKD, CD and FED. If these taxes are reduced, the prices of the cars will go down and the demand will become more stable.

A seller pays a handsome amount of taxes on the purchase of a car which vary from 30 percent to 38 percent. For instance, a customer contributes taxes of Rs 6.0 to Rs. 7.6 million when purchasing car worth Rs. 2 million.

The auto industry depends on other industries like rubber, plastic, engineering and etc. It this sector is developed, other sectors will also be strengthened. On the other hand, hundred thousands of jobs could be created for youth as it is said that one job in an auto company creates 100 jobs in auto parts industries.

Car Demand Set To Grow in Pakistan

Pakistan has immense demand for cars as sales showed a 15 percent CGAR in the past five years and the new entrants are coming in Pakistan with foreign investments to set up their assembly plants.

Kia Lucky Motors is one of the companies with a Greenfield status, a tax-based incentive by the government under Auto Development Program to attract the investment in this particular sector and develop its local market.

Pakistan’s demand and production of cars could swell to 0.5 million by the end of 2025 and nearly 1 million by 2030 with the consistent policy and the demand of the local market. Thus, the installed production capacity of cars will be enhanced to more than 600,000 units per annum from the present level of 350,000 units per annum.

Presently, Rupee’s depreciation against Dollar and high-interest rates of banks are a challenge for the sector but it will not remain the same.

Kia Lucky Motors is the first to establish its business under the category of new entrants and invested an amount of $175 million within a record period of 18 months with a production capacity of 50,000 units.

Kia Sportage has been designed to meet the gap in the local market. It will be a 2000cc car and an addition in the gap of 1800 cc to 2700 cc, Asif Rizvi added.

  • Indeed. but we don’t yet have the roads to support such high demand for cars. we already see cars congestion, traffic jams on a daily basis. what would happen if the government would reduce taxes? a huge influx of cars on Pakistani roads not prepared for such traffic. we need to be able to observe things on a higher end.

    • traffic Jam is every where in the world. I am living in Bahrain a tiny island and probably the cars are 100 percent per capita more than Pakistan. Government is building road infrastructure and let them build the car manufacturing units to engage our generation to get some experience as other people getting in the world in manufacturing. More manufacturing units means more jobs, more industrial growth, more refining growth.

  • If the car assemblers work on deletion program honestly and reduce the foreign component thereby reducing the prices the taxes will automatically come down. Its simple mathematics. Its a two way road. No free lunches dear.

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