In the automotive arena, the government of Pakistan faces a dilemma where they have to choose between listening to used car importers who are lobbying for relaxation in the import policy, or the local auto-manufacturers who are discouraging it.
In a recent development, the Minister of Industries and Production Hammad Azhar received a letter from the Pakistan Automotive Manufacturers Association (PAMA) which highlighted a number of concerns about the government considering to relax the vehicle import policy for used cars.
The letter stated that this decision is likely to harm the trust of new investors and place the local auto industry in jeopardy. The letter highlighted the entrance of Hyundai, Kia, and Datsun to the automotive market while assuring that the supply is likely to surpass the demand in the market with the arrival of new automakers.
In reference to this development, the letter said that encouraging vehicle imports would be redundant and costly and would be harmful, not just for the automotive industry, but for the economy.
The letter also claims that imported car dealers exploit the policy, that is originally intended for overseas Pakistanis, and illegally import vehicles which results in substantial loss of foreign exchange through illegal channels of hundi and hawala.
It added that owing to the abuse of the said policy, the foreign exchange pilferage is estimated at a whopping $2 billion per year. This is due to General Sales Tax (GST) and Value Added Tax (VAT) evasion by importers and loss of tech transfer to the country.
There is a particular lot among Pakistani motorists that prefer imported cars over locally manufactured or assembled cars. The reason for their choice has much to do with the quality of the imported product, as even if the imported cars are 2nd hand, they offer a much better ride, a wider range of tech features, and a better fit and finish.
Although the concerns by PAMA are certainly valid, there’s a reason why people are interested in importing used vehicles in the first place. A lot of meaningful inferences can be drawn by the automakers in Pakistan if they listen to the demands of a Pakistani car owner. And the culture of shady automotive import business can be laid to rest for good.